Friday, August 5, 2011

…forget Washington

By kay.e.strong


I don’t know about you...but me…I’ve heard just about all the left-brain analysis about left-brain decision makers with their left-hand dipped deep into the pork barrel of leftover monies in Washington that I can take! As the conversation about jobs creation ratchets up perhaps the best news is really in our own backyard.
 
A study concludes that smaller, locally owned business (10-99 employees) are actually a better source for igniting the economy, improving innovation and productivity on a local level and providing higher long-term economic growth than large (more than 500 employers) firms or those headquartered in other states.

The Penn State U study Does Local Firm Ownership Matter conducted by Fleming and Goetz drew on a data set of 2,953 business owners located in both urban and rural counties to assess whether per capital density of locally owned businesses affected local growth.  Their results provide “strong evidence that local ownership matters for economic growth but only in the small size category. Results are robust across rural and urban counties.” 

When small, locally owned firms rely on other local businesses for service-support such as legal, accounting, maintenance and supplies the local jobs creating ecosystem is strengthened.  Over time all ecosystems are sustained through diversification.  In the jobs creating ecosystem new startups are the source of that diversification as new business fill new niches.

According to 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 admonishes that “We can’t look outside of the community for our economic salvation. The best strategy is to help people start new businesses and firms locally and help them grow and be successful.”

At the end of the day--if it’s gonna’ happen, we're better off nurturing our own local job creation ecosystem than looking to self-absorbed Washingtonians haggling over the next program on the chopping block, while spending on luxury goods by high-end consumers soars despite the overall drop in retail sales!


Kay Strong, Ph.D., Southern Illinois University, M.T., University of Houston, M.A., Ohio University; Associate Professor at Baldwin-Wallace College; Areas of expertise: international economics, contemporary social-economic issues, complexity and futures-based perspectives in economics. E-mail: kstrong@bw.edu

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.