The Impact of Small Business in our National Economy Term Paper

The Impact of Small Business in our National Economy - Term Paper Example national economy. Impact of Small Business on the American Economy United States probably has the largest small business sector in advanced western economies. Small businesses play several auxiliary roles in the U.S. economy; these roles vary depending on stage of evolution and overall economic state. In 1990s, small business held nearly half of total private sector employment and production (Gaddy, 2002, p.182).When it comes to defining what constitute a small business, there is no standard consensus because it varies from country to country. According to U.S. Census Bureau, in United States, nearly 80% of small businesses have less than twenty employees (2004). Earlier than 1970, the term small business was rarely used in media or business news. It became popular after the publication of David Birch’s work. His work’s summary in a one liner that made small business famous was, â€Å"two third of all the new jobs created were produced by firms with twenty or fewer emp loyees† (As cited in Dunkelberg, 1995). Small businesses serve as backbone of the U.S. economy. Approximately 25 million small businesses provide jobs for half of private employees in America. For more than a decade, small firms proved to be an economic steamroller for the U.S. national economy. ... Today, more than 250,000 small firms export; it is thrice the number of companies exporting a decade ago. Several small businesses work for exporters indirectly, such as, local suppliers and subcontractors working for larger firms. Every one from three export sales dollar is invested back into small business. However, the numbers should multiply rapidly in order to cope with the challenges posed by globalization and trade imbalances (Manzullo, n.d.). Job Opportunities Small businesses contribute enormously for the U.S. economy and society. Most evident of them all is new job opportunities created by small businesses every year. According to an estimate, on average, three of every four jobs are offered by small companies having less than 500 employees. Considerable share of these jobs are created by small companies having four to fewer employees. Small firms support and contribute to numerous industries, such as, restaurants, service businesses, amusement and recreation, wholesale tra de, engineering, management services, and construction trade contractors (as cite in Boone & David, 2010, p.194). Boone and David (2010) further state: Small businesses form the core the U.S. economy. Businesses with fewer than 500 employees generate more than half nation’s gross domestic product. Small firms represent 99.7 percent of all the employer firms and pay more than 45 percent of the total U.S. private payroll. Over half of firms are home-based, while 2 percent are franchises. In addition, small businesses employ almost half of the nation’s private nonfarm workforce. (p.194) New Industry Creation Small business sector provides an outlet to entrepreneurial innovation and ideas which generate completely new industries. News businesses and industries fuel local