Locally Owned Small Business May Pack a Bigger Economic Punch

Small, locally owned businesses and start-up companies tend to provide higher, long term economic growth according to Dr. Stephan Goetz,professor of agricultural and regional economics at Penn State University and director of the Northeast Regional Center for Rural Development.  Dr. Goetz and graduate student David Fleming were investigating whether firm ownership and size mattered in terms of economic growth.

Dr. Goetz says the research suggests that the smaller firms and locally owned firms give the biggest bang for the buck in terms of economic growth.

 Dr. Goetz says they suspect there are more opportunities for creative innovation and new process and product development in the smaller companies.  He says over time, you have more of an entrepreneurial hotbed if you have multiple smaller firms that are trying to innovate, than if you have the bigger firms.

Dr. Geotz adds that smaller, local firms would be more likely to use local logistic providers, wholesalers and advertising outlets to meet their supply chain and business needs. He says firms based out-of-state would be providing those services out of centrally located facilities, or outsourcing them overseas.

The study also finds that as a company grows, the economic benefit appears to diminish. Medium and large-sized locally owned businesses were not associated with faster economic growth in later years.

Dr. Goetz says a better strategy to promote economic growth may be encouraging local businesses and creating an environment that attracts local entrepreneurs.