New Firms Needed
District of Columbia
Nov 09, 2011
Frequently--and especially in Washington, DC--entrepreneurship gets tangled up in discussions of what is good for 'small business.'
A recent op-ed by Robert Litan on CNBC.com draws the distinction between new firms and small ones--namely, the ability of the former to generate economic growth through the creation of new jobs and major productivity advances through disruptive innovation.
He also suggests that Global Entrepreneurship Week serves an important purpose and should "remind us of the critical importance of entrepreneurial thinking in all economies, while keeping our eye on the balls that matter, the new firms that bring really big new ideas to market."
Litan serves as the vice president of Research and Policy at the Kauffman Foundation and a senior fellow at the Brookings Institution. An excerpt of his piece, "Small Is Not New, Big Is Not Better" appears below.
SMALL IS NOT NEW, BIG IS NOT BETTER
An economic narrative is beginning to take hold that because most small business owners have no plans for bringing new ideas to market or growing their companies, the U.S. economywill only come roaring back if it's large established companies start spending the roughly $2 trillion in cash they are sitting on.
This narrative has been revived in a paper published in the fall issue of Brookings Papers on Economic Activity by two economists from the University of Chicago, Erik Hurst and Benjamin Pugsley.
Hurst and Pugsley are right to question the growth potential of the small business sector taken as a whole. But their paper and its implicit endorsement of bigness is being misconstrued by a growing number of commentators.