UNIVERSITY PARK, Pa., Aug. 4 (UPI) — Small local businesses, not big nationwide companies, could be the key for communities to ignite long-term economic growth, U.S. economists say.
Economists at Penn State University say small, locally owned businesses and startups usually generate higher incomes in a community, whereas big, non-local companies can actually depress a local economy.
“Local ownership matters in important ways,” Stephan Goetz, professor of agricultural and regional economics, said Thursday in a Penn State release.
“Smaller, locally owned businesses, it turns out, provide higher, long-term economic growth.”
Goetz defines those businesses as standalone companies with 10 to 99 employees owned by residents or businesses with headquarters in the same state.
Large corporations have internal systems for services such as accounting, legal, supply and maintenance that are often based outside the county or state they operate in, outsourcing those jobs away from local residents, he said.
“Many communities try to bring in outside firms and large factories,” Goetz said, “but the lesson is that while there may be short-term employment gains with recruiting larger businesses, they don’t trigger long-term economic growth like startups do.
“We can’t look outside of the community for our economic salvation.” Goetz said. “The best strategy is to help people start new businesses and firms locally and help them grow and be successful.”