During Debates, The Only Good Businesses Are Small Businesses

During last night’s debate, President Obama and Governor Romney referred to small business 23 times. (Obama did it eight times; Romney did it fifteen times.)

But where was the love for big business? In both presidential debates, big business has been the big elephant in the room. Last night, while responding to a question about George W. Bush, Romney said:

Our party has been focused on big business too long. I came through small business. I understand how hard it is to start a small business. That’s why everything I’ll do is designed to help small businesses grow and add jobs.

It’s not hard to understand why both Obama and Romney want to stick to talking about small business. Everyone likes small businesses—they’re uncontroversially good. The streets of small-town America are lined with small stores and restaurants well-loved by their local communities.

But are small businesses really the key to exponential job growth? Bill Aulet and Fiona Murray of MIT don’t think so. In an op-ed in today’s Boston Globe, Aulet and Murray draw an important distinction between two different routes to new job creation:

There are small- and medium-sized companies created to offer traditional goods and services to a local or regional market. Think “mom and pop” operations. They include your yoga studio and the pizza place down the street. While valuable to the economy in general, these companies are not large enough to serve as a growth engine for the entire economy. They do, however, offer important opportunities for employment and provide valuable services.

The other route to job creation comes from exploiting new technological advances to create businesses that aim to compete in a global market. Think of a large pharmaceutical company or biotech firm.

Both small companies and innovation-driven enterprises create jobs, but the types and numbers of jobs they create are remarkably different.

Which route to job creation promises more and better jobs for Americans? Aulet and Murray think it’s pretty clear:

Innovation-driven companies generate many more new jobs and exports than small business.

Aulet and Murray aren’t the only ones to make this point. And yet it seems unlikely that President Obama and Governor Romney will stop beating the small business drum anytime soon. It’s a go-to, feel-good talking point for both parties in these debates.

That’s kind of a shame—because small businesses are wonderful for the country, but even better are those that grow into big businesses. Those are the companies that are opening new markets for consumers and job-seekers. It would be nice if Obama and Romney stopped pretending otherwise.


Photo Credit: Michael Reynolds, Reuters