Growth Champions: The Battle for Sustained Innovation Leadership

CHAPTER 3

Drivers of Change

Small Companies Acting Bigger/Big Companies Getting Smaller

In the past ‘scale’ mattered and large companies were able to exert wider influence, deploy more resources, and so reap greater rewards than small firms. For many countries having a few strong national champions was enough to more or less guarantee ongoing economic success. Influential multinationals such as IBM, Unilever, General Electric, and Ford were seen to be growth drivers and so encouraging such companies to set up facilities in different locations has been core to many national innovation or foreign direct investment (FDI) strategies. There used to be clear blue water between what could be achieved by these large multinationals and by smaller organizations. Today that gap is rapidly closing.

In Western economies small- and medium-sized enterprises (SMEs) have played a crucial role in job creation in the early part of the 21st century, and maintaining this momentum is central to many national growth plans today. In the United States, for example, small businesses (with fewer than 500 employees) now account for around half the nation's GDP and more than half its total employment. In addition small businesses account for around a third of all exports. This is double what was achieved a couple of decades ago.

As more accessible technologies (e.g., cloud computing) are enabling small companies to act like big ones, the productivity gap between large and small firms has narrowed. Small companies ...