The Dynamic Role of Small Firms: Evidence from the U.S

Posted: 24 Nov 2009

See all articles by David B. Audretsch

David B. Audretsch

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Date Written: 2002

Abstract

The dynamic role small and medium enterprises play in the U.S. economy is discussed. Previous research indicates that small and medium enterprises (SMEs) play a vital role in helping the U.S. compete in the global job market. However, when economic activity comparisons are made with other countries, U.S. SMEs were found to contribute a considerably lesser amount to production efficiency. This discrepancy lies in the difference between the dynamic and static roles played by these small firms. Using data from the Longitudinal Establishment and Enterprise file, produced by the U.S. Bureau of the Census and the U.S. Small Business Administration, it is demonstrated that while SMEs place a production efficiency burden on the U.S. economy, this burden is offset by the sizable contribution SMEs make to the development and growth of dynamic efficiency in the U.S.—particularly contributing to innovation, job generation, and international competitiveness. The discussion is divided into four sections: the first section stresses the important part small and medium enterprises play in the U.S. economy; the second contrasts the static role and dynamic role of SMEs; the third section examines the policies that have contributed to promoting the dynamic contributions of SMEs; and the fourth concludes that the greatest contribution made to economy efficiency by small firms is dynamic and evolutionary in nature—i.e., small firms serve as agents of change.(SFL)

Keywords: Longitudinal Establishment & Enterprise Microdata (U.S. Census Bureau), Production efficiency, U.S. Bureau of the Census, Economic impact, Firm productivity, Innovation process, Job creation, U.S. Small Business Administration (SBA)

Suggested Citation

Audretsch, David B., The Dynamic Role of Small Firms: Evidence from the U.S (2002). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1510987

David B. Audretsch (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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