U.S. Near Bottom In Proportion Of Small Businesses - InformationWeek
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8/14/2009
08:43 PM
Jake Widman
Jake Widman
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U.S. Near Bottom In Proportion Of Small Businesses

A recent study by the Center for Economic and Policy Research has found that, perhaps surprisingly, the United States has one of the smallest small-business sectors among developed nations.

A recent study by the Center for Economic and Policy Research has found that, perhaps surprisingly, the United States has one of the smallest small-business sectors among developed nations.The report, "An International Comparison of Small Business Employment" (PDF download) examined the status of self-employment and small business in 22 of what the report calls "rich democracies" -- basically, Europe, Scandinavia, Canada, Australia, and New Zealand in addition to the U.S.

One part of the report examines the share of employment in small enterprises, which are divided into manufacturing, computing-related services, research and development, and lower-tech service industries. The definition of "small enterprise" varies somewhat, according to the data available: in manufacturing, it can mean fewer than 20 or fewer than 500 employees (both sets of data are given), while for the other sectors it means fewer than 100. The report says, though, that the results would not be qualitatively different if the cutoffs changed.

For example, only about 11% of U.S. manufacturing employment is in businesses with fewer than 20 employees, ahead of only Ireland and Luxembourg. (Greece leads, at 35.3%.) By contrast, 51% of U.S. manufacturing employment is in businesses with fewer than 500 employees -- but that's the lowest figure, with Portugal, Italy, and Spain at the top with more than 80 percent.

The results hold for the other sectors as well, even in what the report calls "high-tech services." Only 32% of U.S. employment in computer-related services is in businesses with fewer than 100 employees, while in Italy and New Zealand the proportion tops 70%. And 25% of U.S. employment in R&D is in businesses of that size, while Italy is again over 70% and Spain is second with 48%.

The report does not question United States businesses' devotion to entrepreneurship; rather, the conclusion wonders whether "self-employment and small-business employment may be a less important indicator of entrepreneurship than we have long thought." Rather, the report says, it might be worth asking what we can learn from other countries about sustaining small businesses. And, inserting itself into today's hottest political issue, it suggests that access to universal health care in other advanced democracies may remove one of the deterrents to startups and small companies.

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