Small and Large Companies Working Together

Nov 12, 2010

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Small and big businesses have long helped strengthen the U.S. economy and each other. Today, U.S. businesses of all sizes are struggling to recover from the world financial crisis and great recession. A paramount challenge for our government is to put in place policies to help all American businesses boost their sales and thereby boost their hiring and capital investment.

Neither small business nor large business operates in a vacuum. Each is deeply embedded in the overall U.S. economy, with extensive connections to each other. One important connection is the supply chain: small and big businesses selling each other intermediate inputs, i.e., the goods and services used as inputs in the production process.

According to a new survey of Business Roundtable companies, the U.S.-parent operations of the typical U.S. multinational buys goods and services from more than 6,000 American small businesses; buys a total of more than $3 billion in inputs from these small-business suppliers; and relies on these small-business suppliers for more than 24% of its total input purchases. U.S. small businesses are critically important partners with U.S. multinationals.

Collectively, U.S. parents of U.S. multinationals purchase an estimated $1.52 trillion in intermediate inputs from U.S. small businesses, which is about 12.3% of their total sales.

Government policies targeted at just small businesses or at just big businesses affect all firms, not just firms of a particular size. For example, new trade agreements that generated $1 billion in new exports by U.S. multinationals would boost their input purchases from U.S. small businesses by approximately $174 million.

1 As reported in the most-recent GDP report, U.S. Bureau of Economic Analysis, released 8/27/10.

2 As reported in the most-recent Employment Situation report, U.S. Bureau of Labor Statistics, released 9/3/10.

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