Entrepreneurs and a Tough Economy

The September 14 Sunday New York Times ran an interesting article (“Economy to Entrepreneurs: Turn Back”) about entrepreneurs who have decided to work for larger firms when faced with a tough economy.

The piece is mostly anecdotal – so one can debate how widespread this phenomenon is – but well worth reading.

Few in the entrepreneurial sector, however, would likely disagree with the following from the report:

Research has consistently shown that the share of employment and sales accounted for by small businesses tends to be more cyclical than for large ones, says David B. Audretsch, a professor at Indiana University and the director of the Max Planck Institute of Economics in Jena, Germany. When the economy expands, small businesses gain more than large companies. In an economic downturn, small businesses tend to be hit harder.

Suffering the most are companies in construction, manufacturing, retailing, finance and overseas travel, says Chad Moutray, chief economist of the federal Small Business Administration. As for location, he says, “small businesses have been hardest hit in areas where the housing crisis is at its worst.”

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council