Entrepreneurship, Second Edition

1.1. Entrepreneurship and Small Business in the United States

In 2010, there were 29 million or so U.S businesses, of which approximately 99.9% were small businesses. ^[] In general, businesses with 500 or fewer employees are classified as small. ^[] They account for half the private-sector workers and 44.3% of the private payroll, and they generate approximately half the non-farm private GDP. If the small-business sector of the U.S. economy were a nation, its GDP would rank second in the world behind that of the U.S. medium- and big-business sector, ahead of the entire economy of Japan, and far ahead of the economies of Germany, the United Kingdom, France, and Italy. ^[]

Not only are small businesses the engine for job creation, but also they are a powerful force for innovation. They hire 40% of all high-tech workers and produce approximately 13 times more patents per employee than large firms; those patents are twice as likely as large firm patents to be among the one percent most cited. ^[] Their share of U.S. research and development (R&D) grew from 5.9% in 1984 to an estimated 20.7% in 2003, with the dollar value growing from $4.4 billion in 1984 to an estimated $40.1 billion in 2003—a ninefold increase. ^[]

Half of the 29 million small businesses are part-time undertakings and half are full-time. Approximately 6 million small businesses are employer companies with one or more employees in addition to the self-employed owner.^[] Approximately two-thirds of the full-time businesses ...