![]() ![]() In 1994, for example, a young computer-science graduate working on Wall Street came up with the novel idea of selling books over the Internet. Small business owners are also particularly adept at finding new ways of doing old things. Over the years, the list of important innovations by small firms has included the airplane and air-conditioning, the defibrillator and DNA fingerprinting, oral contraceptives and overnight national delivery, the safety razor, strobe lights, and the zipper (Baumol, 2005). During a recent four-year period, large firms generated 1.7 patents per hundred employees, whereas small firms generated an impressive 26.5 patents per hundred employees (Breitzman & Hicks, 2011). According to the SBA, small companies develop more patents per employee than do larger companies. Given the financial resources available to large businesses, you’d expect them to introduce virtually all the new products that hit the market. ![]() Table 5.1 “Small Firm Job Gains and Losses, 1993–2008 (in millions of jobs)” reports the net increase in jobs generated by small firms for the fifteen-year period of 1993 to 2008 and breaks it down into job gains from openings and expansions and job losses from closings and contractions. Fortunately, over time more jobs are added by small firms than are taken away, which results in a net increase in the number of workers. But the survival and expansion rates for small firms is poor, and so, again at any given point in time, many small businesses close or contract and workers lose their jobs. These small companies need workers and so hiring takes place. ![]() Why is this true? At any given point in time, lots of small companies are started and some expand. Although the split between those working in small companies and those working in big companies is about even, small firms hire more frequently and fire more frequently than do big companies (Headd, 2011). adults either are self-employed or work for businesses with fewer than five hundred employees (U.S. workers first entered the business world working for small businesses. Let’s take a closer look at each of these contributions. In addition, they complement the economic activity of large organizations by providing them with components, services, and distribution of their products.
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