Small Business in America

I have just read an interesting book as part of my reading for my PhD. "A History of Small Business in America", by Mansel G. Blackford has provided me the perspective to gauge the rate and type of change currently experience by Small to Medium Sized Enterprises(SME). Everyone tends to think that their experiences and situations are unique in history. What Blackford has provided is proof that what is old is new again.

It is very clear from his research that SMEs are successful if they have a profitable niche to work in and can stay specialized enough to be invisible to large companies, and I would also have to add as a result of my research...Invisible to regulators.

As globalization continues with the formation of mega-enterprises, I think we will also see a resurgence in formation of SMEs due to outsourcing of services that the megas do not want to do and markets where they cannot compete with smaller, more nimble and specialized SME. This makes finding the reasons for an SME to act in a socially responsible manner, imperative.

Think about it in this way. Say the owner of a small manufacturing company is approach by a meta-national firm to provide cleaning chemicals for its stores. The chemicals will be used by another SME, who provides the cleaning contract services to the meta-national. The meta-national sets the price they will pay for the cleaning chemicals and says that they want them to be safe. The service company uses the chemicals and finds a problem with the toxicity of a chemical. This is reported to the regulators, who cite the meta-national...but guess what...the meta-national is not involved in the manufacturing, selling, or purchasing of the chemicals...that is an arrangement between the two SMEs.

The importance of this scenario is that the use of SME, which is like a small mouse in the food chain invisible to most predators(regulations), to do the "dirty work" of the meta-nationals does not enhance progress towards social responsibility or sustainability. Thus creation of SMEs to do these jobs is similar to "sweat shop ethics". It therefore becomes important to educate the entrepreneurs that run SMEs not to be used in such a fashion...to allow meta-nationals to be as bad as the law allows through sub-contracts of services where the only competitive advantage the SME has is regulatory invisibility.

In Blackford's book, he does not mention that this has been an historical benefit of being small. This may be a new competitive advantage that is ancillary to meta-national enterprises and globalization. For this reason, the ethics training of business people to help insure behavior that supports the rights of future generations to exist is crucial. How do we get small business owners to buy into such ethical behavior. The hook needs to come from success. If the successful SME behave ethically and this is a benefit rather than a liability, then the behavior will spread. If less-ethical behavior promotes success, then this type of behavior will be reinforced.

Historically, Blackford is able to show that SMEs will respond to positive stimulus and change to enhance economic performance...and it can happen quite rapidly. He is also clear on what happens if SMEs do not change to increase profits and efficiency. They go the way of buggywhip makers...and become footnotes in history books.