The Power of the Middle

When it comes to advocating for small business and entrepreneurs as key economic drivers, I can’t be topped by too many people.  But, in our efforts to push the entrepreneurship message, we may often neglect the important role that medium-sized firms play in our economy.  A article in the latest Economist looks at America’s “mighy middle.”    It reports on recent research from Ohio State University’s National Center for the Middle Market which finds that the US is home to 197,000 medium-sized firms defined as those with annual revenue between $10 million and $1 billion.  (As a point of comparison, the US is home to about 6 million firms with employees.)  These mid-sized firms did relatively well in the Great Recession, with 87% still in business (compared to 57% of small firms and 97% for large firms with revenue over $1 billion.).  Unlike their smaller and larger brethren, the middle firms created jobs, adding 2.2 million positions between 2007 and 2010, and their growth rate in 2010-2011 outpaced other size categories as well.  The message?  Small is still beautiful, but medium is nice, too!!!

This research accords with some earlier studies as well.  Using the NETS (National Establishment Time Series) data base, a 2011 study by Don Walls found that expansion by existing firms, not new jobs from start-ups, is the primary creator of new employment in the US economy.   Many of the firms in this study were smaller than those in the Ohio State research, but the basic point remains similar:  don’t ignore existing companies as creators of new jobs and new innovations!!

 

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