Small businesses are the innovators

Small businesses are the creators of most innovation in America. Large corporations are buyers of innovation.

Small businesses are job creators while large corporations are job killers. Small businesses have created more than 22 million jobs since 1980, and more than 50 million since 1965. However, Fortune 500 companies have lost more than 3.5 million jobs since 1980.

But as we move into a global economy, it is fair to ask whether America's small businesses can compete in the global marketplace with the giant corporations of Europe and Asia.

Just 20 years ago it was commonly observed that about 80% of America's exports, were produced by on 1% of America's companies. The big guys, such as Boeing, General Motors and General Electric, dominated international trade on the American side.

But times have changed. There is overwhelming evidence from a variety of sources to show that America's small and medium-sized companies can do very well in the global marketplace.

In January, the U.S. Department of Commerce released a study showing that 50% of U.S. exports, when measured by value, were generated by companies with less than 500 employees.

A recent study by Washington-based American Business Conference, an organization of rapidly growing small and medium-sized companies, found that more than one-half of its members were already selling and/or producing in Europe.

Moreover, David Birch on Cognetic Inc. - the guru of small business and job creation - has found that 52% of America's exporters have fewer than 100 employees.

Birch also found that only one of every thousand very small companies - those with fewer than 20 employees - are involved in international commerce.

However, according to Birch's research, the rate of participation in international commerce jumps dramatically as smaller companies grow. Among companies with 20 to 49 employees the rate is 21 per 1,000 in international commerce; for companies with 50-99 employees the rate is 41 per 1,000; and for companies with 100 to 499 employees the rate jumps to 48 per 1,000.

But Birch found that it takes more than 12 years for most small companies to become active in international commerce, while nearly 50% of large companies become active in international trade in less than 12 years.

What this tells us is that actions aimed at helping small businesses get into international commerce can have a great impact because they can reduce the time it takes for smaller businesses to learn the ropes of foreign trade.

Trade associations, World Trade Centers, better services by banks, as well as public policies to promote trade and commerce through state trade offices can help small businesses and, at the same time, boost the nation's performance in the global marketplace.