Rinse and repeat: Small business needs big business

Thought I would take another stab at this issue of the symbiotic relationship between the big biz and the small biz in a healthy economic ecosystem.   It’s a mostly an argument I have been losing.  From pundits to politicians to the CFIB, the more large businesses we lose, the more calls there are to put more money and focus into small business.  The number of business establishments in New Brunswick has dropped by 2,600 from 2003 to 2011.  Every time we lose a mill or mine or other large firm (such as Maple Leaf Foods in Moncton),  you can see a drop of dozens – even hundreds of small businesses.

The core issue is around exports.  If you could replace a lost paper mill (which was totally export-based and supporting $60 million worth of employment income) with 30 small IT firms all exporting their products (supporting $60 million worth of employment income) – fine.  Trouble is we haven’t been able to do that.

The government response to losing the paper mill is to put $50 million mostly into a variety of projects hoping to stimulate economic activity but we never seem to get back anywhere close to the $60 million in lost employment income and the cycle continues.

In my view, we need both.  We need to ensure we have the large anchor employers and we need to be a place that is fostering more and more Radian6es.

Of course I must restate that our large anchors need to be here with a good business model.  Ongoing, sustained subsidies -propping up an unprofitable business model is not my idea of good economic development.

The government needs to work on the fundamentals: competitive tax rates, excellent workforce pipeline, competitive energy costs, and industry-specific things such as royalties, silviculture, access to public land, R&D, etc.

In the end, just about all of the data I look at would suggest there is a floor – somewhere around 8-10 firms with 200 or more employees per 1,000 firms overall – that if you go much below you will struggle as a regional economy. There are exceptions – there may be a specific set of circumstances – but across the board I would argue this point.  More academic research should be done on this.