While there may be a perception that large and small businesses have conflicting interests, a recent report suggests that a more symbiotic relationship exists. Research by The Business Roundtable found that a typical US multinational buys goods and services from over 6,000 US small businesses. See the following article from The Street.
The relationship between small and large businesses may not quite be the “us vs. them” rivalry commonly perceived.
According to research released Sept. 14 by The Business Roundtable, an association of chief executives of leading U.S. companies, the typical U.S. multinational buys goods and services from more than 6,000 American small businesses — a total of more than $3 billion in inputs from these suppliers — and relies on them for more than 24% of its total input purchases. Collectively, these firms generate an estimated $1.5 trillion in sales for small businesses annually.
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The study is touted as the first of its kind, as government agencies do not collect data on the links between small and large business and “the impact of their interconnectivity on the economy.” It was based on a May-June survey of Business Roundtable member companies across a wide range of industries. Member companies make up nearly a third of the total value of the U.S. stock markets.
“Small businesses are critical to large manufacturers’ supply chains. For instance, every time a Boeing 777 lands anywhere in the world, it arrives with more than 3 million parts reflecting the workmanship of thousands of small, medium and large suppliers, the vast majority of which are from the United States,” Jim McNerney, chairman, president and CEO of Boeing(BA), said in a statement.
“U.S.-based multinationals spend more than $6 trillion annually — about 70% of their total sales — on goods and services used as inputs for their own production. Nearly 89 cents of every dollar spent on these goods and services are paid to U.S. companies, with about a quarter of that going directly to the very small businesses who are struggling to generate sales,” says Matthew J. Slaughter, an associate dean of the Tuck School of Business at Dartmouth who prepared the report.
With large business purchases making up nearly 13 percent of all small-business sales, the report says, ensuring the health of large companies is critical to the success of small companies. It advocates for government policies that don’t narrowly define their scope by company size. An example: Trade agreements generating $1 billion in new exports by U.S. multinationals would boost input purchases from small businesses by about $174 million.
This article has been republished from The Street. You can also view this article at The Street, an investment news and analysis site.