South By North Strategies, Ltd.

Writing in Bloomberg Businessweek, Charles Kenny of the New America Foundation argues that “the notion that small business is the force behind prosperity is not true” and that “the longer the US and other countries cling to this myth, the harder it will be to carry out the kinds of economic policies that might actually stimulate job growth.” From the article …

In the U.S. in 2007 there were around 6 million companies with workers on the payroll. Ninety percent of those businesses employed fewer than 20 people, according to analysis of the latest census data by Erik Hurst and Ben Pugsley of the University of Chicago. Collectively, those companies accounted for 20 percent of all jobs. Most small employers are restaurateurs, skilled professionals or craftsmen (doctors, plumbers), professional and general service providers (clergy, travel agents, beauticians), and independent retailers. These aren’t sectors of the economy where product costs drop a lot as the firm grows, so most of these companies are going to remain small. And according to Hurst and Pugsley’s survey evidence, the majority of small business owners say that’s precisely their intent—they didn’t start a business for the money but for the flexibility and freedom. Most have no plans to grow.
…
Some small companies do grow, of course. Think Apple (AAPL) or Hewlett-Packard (HPQ), which were initially run out of garages, or Google (GOOG), created by two guys in a dorm room. But the vast majority of small enterprises stay small. Eighty percent of U.S. small companies that remained in business from 2000 to 2003—the most recent period for which Hurst and Pugsley compiled data—didn’t add a single employee.