Here is something amazing about the role of small business in a part of the economy most people may have never considered. As explained in McKinsey’s Digital Globalization: The new era of global flows, the most rapidly growing segment of U.S. exporting companies are businesses with less that 50 employees.
“… the share of exports by large multinational corporations dropped from 84 percent in 1977 to 50 percent in 2013. Companies with fewer than 500 employees accounted for 97.8 percent of all identified US exporters and 97.2 percent of all identified US importers in 2011. The number of US exporting entities with fewer than 50 employees, in particular, has grown more rapidly than firms with 50 to 500 employees.”
“But wait,” you may be thinking: “That doesn’t sound quite right.” That’s because the dominant narrative in the general media — especially during this election period — suggests that U.S. trade is something we have been been clobbered in and that we have shipped all the U.S. jobs overseas.
But the analysis by McKinsey suggests something else is happening, something counter to the prevailing narrative: In reality, small businesses worldwide are becoming “micro-multinationals” by using digital platforms such as eBay, Amazon, Facebook, and Alibaba to connect with customers and suppliers in other countries.
Global customers are increasingly buying things from companies not located in their home countries. And here’s the good news for U.S. small businesses: much of that purchasing is being made from small U.S. businesses.
Here’s another surprise. The growth in small businesses trading internationally is also benefitting the self-employed, as they are beginning to be more and more globalized. This is echoed in data from the MBO partners State of Independence studies. These show over 2 million U.S. independent workers are exporters of services or goods.
For those who don’t want to wade through McKinsey’s 128 page report or even their 28 page summary, these two articles provide a good overview:
- What Happens When Global Trade Goes Virtual – from Bloomberg View
- These Charts Show How Globalization Has Gone Digital – Huffington Post