Business Cycle Affects Small Firms...
...Differently Than Larger Firms, New Study Shows
Inappropriate For Small Business
WASHINGTON, D.C. - Small businesses really are different from their larger counterparts and they react differently to economic conditions, a new study shows. Issued today by the Office of Advocacy, Small Business during the Business Cycle investigates how small businesses have fared during the ups and downs of the business cycle over the past five decades.
"This study confirms what we have known all along," said Thomas M. Sullivan, Chief Counsel for Advocacy. "Small businesses, particularly manufacturers, really are different from their larger counterparts and they react differently to economic conditions. They aren't just miniature versions of multi-national corporations, and policy makers need to take these differences into account when passing laws and issuing regulations," he said.
The study, written by Joel Popkin and Company with funding from the Office of Advocacy, shows that size does matter in relation to economic conditions, particularly in manufacturing industries. For instance, large manufacturing businesses grow faster during expansions and may dip lower during contractions. On the other hand, small construction firms are both more negatively affected by downturns and more positively affected by expansions than large construction firms.
The study also looked at using quarterly survey data from the National Federation of Independent Business (NFIB) as an indicator of small business success. The study found that the NFIB Index of Small Business Optimism can be an indicator of expansion in small business GDP.
The Office of Advocacy, the "small business watchdog" of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.
For more information and a complete copy of the report, visit the Office of Advocacy website at www.sba.gov/advo.
Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsel's efforts. For more information on the Office of Advocacy call (202) 205-6533.
