Featured Research

from universities, journals, and other organizations

Locally owned small businesses pack powerful economic punch

Date:
August 4, 2011
Source:
Penn State
Summary:
Thinking small and local, not big and global, may help communities ignite long-term economic growth, according to economists.

Thinking small and local, not big and global, may help communities ignite long-term economic growth, according to Penn State economists.

Small, locally owned businesses and startups tend to generate higher incomes for people in a community than big, nonlocal firms, which can actually depress local economies, said Stephan Goetz, professor of agricultural and regional economics.

"Local ownership matters in important ways," said Goetz. "Smaller, locally owned businesses, it turns out, provide higher, long-term economic growth."

The association of small businesses with enhancing economic growth in communities, regardless of the community's population size and density, was statistically significant, said Goetz, who serves as director of the Northeast Regional Center for Rural Development. Small local businesses are standalone firms with 10 to 99 employees owned by residents or businesses with headquarters in the same state.

The presence of large firms that employ more than 500 workers and that are headquartered in other states was associated with slower economic growth.

Big-box and large corporations have internal systems for services such as accounting, legal, supply and maintenance that are not necessarily based within the county or state. In addition to outsourcing services that were once provided by community businesses, nonlocal large companies may displace more entrepreneurial small firms. Examples of non-locally owned large companies include retail chain stores such as Wal-Mart and Best Buy, and service providers such as U.S.-based call centers for car rental agencies, banks, health care providers and telecommunications firms.

According to Goetz, small businesses and startups provide more than just jobs for community members. They also can improve innovation and productivity on a local level and use other businesses in the community such as accounting and wholesalers, while larger businesses develop their own infrastructure.

The researchers, who report their findings in the current issue of Economic Development Quarterly, studied data from the Edward Lowe Foundation on the economic growth and residence status of business owners in 2,953 U.S. counties, including both rural and urban counties.

"This is really a story about startups," said Goetz. "Many communities try to bring in outside firms and large factories, but the lesson is that while there may be short-term employment gains with recruiting larger businesses, they don't trigger long-term economic growth like startups do."

Goetz, who worked with David A. Fleming, graduate student in agriculture, environmental and regional economics, said the economic benefit of locally owned businesses appears to diminish as the firm grows. Medium-sized and large-sized businesses owned by residents are not associated with faster economic growth in later years.

Goetz said a better strategy to promote economic growth may be encouraging local businesses rather than recruiting large outside firms.

"We can't look outside of the community for our economic salvation." Goetz said. "The best strategy is to help people start new businesses and firms locally and help them grow and be successful."


Story Source:

The above story is based on materials provided by Penn State. Note: Materials may be edited for content and length.


Journal Reference:

  1. D. A. Fleming, S. J. Goetz. Does Local Firm Ownership Matter? Economic Development Quarterly, 2011; 25 (3): 277 DOI: 10.1177/0891242411407312

Cite This Page:

Penn State. "Locally owned small businesses pack powerful economic punch." ScienceDaily. ScienceDaily, 4 August 2011. <www.sciencedaily.com/releases/2011/08/110804105907.htm>.
Penn State. (2011, August 4). Locally owned small businesses pack powerful economic punch. ScienceDaily. Retrieved September 1, 2014 from www.sciencedaily.com/releases/2011/08/110804105907.htm
Penn State. "Locally owned small businesses pack powerful economic punch." ScienceDaily. www.sciencedaily.com/releases/2011/08/110804105907.htm (accessed September 1, 2014).

Share This




More Science & Society News

Monday, September 1, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Get on Your Bike! London Cycling Popularity Soars Despite Danger

Get on Your Bike! London Cycling Popularity Soars Despite Danger

AFP (Sep. 1, 2014) Wedged between buses, lorries and cars, cycling in London isn't for the faint hearted. Nevertheless the number of people choosing to bike in the British capital has doubled over the past 15 years. Duration: 02:27 Video provided by AFP
Powered by NewsLook.com
Thailand Totters Towards Waste Crisis

Thailand Totters Towards Waste Crisis

AFP (Sep. 1, 2014) Fears are mounting in Bangkok that poor planning and lax law enforcement are tipping Thailand towards a waste crisis. Duration: 01:21 Video provided by AFP
Powered by NewsLook.com
California Passes 'yes-Means-Yes' Campus Sexual Assault Bill

California Passes 'yes-Means-Yes' Campus Sexual Assault Bill

Reuters - US Online Video (Aug. 30, 2014) California lawmakers pass a bill requiring universities to adopt "affirmative consent" language in their definitions of consensual sex, part of a nationwide drive to curb sexual assault on campuses. Linda So reports. Video provided by Reuters
Powered by NewsLook.com
As Drought Continues LA "water Police" Fight Waste

As Drought Continues LA "water Police" Fight Waste

AFP (Aug. 29, 2014) In the midst of a historic drought, Los Angeles is increasing efforts to go after people who waste water. Five water conservation "cops" drive around the city every day educating homeowners about the drought. Duration: 02:17 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins