Earlier today, I appeared on Jim Blasingame’s radio program, The Small Business Advocate, to discuss the current state of the small business economy. Here is a link to the podcast of my appearance.
Continuing my posts on the importance of entrepreneurship to innovation, the Office of Advocacy last week released a study by Ceteris, Inc., titled “Innovation in Small Businesses: Drivers of Change and Value Use.” This research examines patent applications and finds that research and development enhances the overall market value of many firms; moreover, overall innovative activity increases with more employees. (Note that this study only looks at small businesses; therefore, it does not conflict with earlier studies from the Office of Advocacy highlighting the importance of small business innovation.)
As with a number of other issues, I asked users of Linked In to discuss policy solutions to stimulate more small business innovation. Among their suggestions are the following:
I suspect that there are many more ideas out there, but it is nice to see such universal appreciation of our innovative capacity. Moreover, all of this has real implications for our economic growth, which also appeals to be fully understood.
Earlier today, I participated in a workshop sponsored by Intuit and Emergent Research, the authors of the Future of Small Business Report, “Defining Small Business Innovation.” Steve King and Carolyn Ockels of Emergent Research define innovation more broadly than many policymakers and academics. To them, more small businesses are innovators than even the owners might admit to. When they interviewed small business owners, many of them said that they did not innovate, but then they went on to describe various tweaks and processes that they had come up with to improve their firm or to better compete. Indeed, they were innovators (even if they did not know or want to admit it).
Part of the challenge of promoting such innovative capacity is how to measure it. From a researcher’s perspective, innovative tweaks are harder to quantify, but that should not diminish their importance. Another challenge is changing perceptions of what an innovation is. When you mention innovation, most people think of technology, for instance. As a result, policies that might enable such innovation are different than might be prescribed for a much broader definition.
I look forward to reading future reports, some of which will stem out of the discussion today, on this topic from Intuit as part of their series. Good job so far.
All month, Christina Olachia is highlighting cancer stories for a number of her friends and family on her blog, The Uniboob Club. Hopefully, you have been following along. If you remember, Christina was a participant in January for my blog book tour, and she once again wanted to highlight our struggle with breast cancer. Today, you can read a post that I wrote for her blog here. In it, I discuss how life threw us a curve despite our best intentions. Nonetheless, life moves on. As I state at the end of this post:
The late Milton Friedman taught us that wealth is a key determinant of consumption levels; this includes both current income and one’s expectations for the future. This principle is known as the “permanent income hypothesis,” and I have thought about this many times in the last few months.
Americans (and our counterparts around the world) have seen a double-whammy of falling equity and housing values, making us all feel less well off. Earlier this week, the Dow Jones Industrial Average hit lows that we have not seen since 1997, wiping out nearly a dozen years of wealth creation in the equity markets. (It is hard to believe that the DJIA peaked on October 9, 2007 at 14,164.53, and it is down 53.22 percent since then!) Meanwhile, according to the S&P/Case-Shiller Home Prices Index, housing prices in the top ten metropolitan communities peaked in June 2006 and have fallen 28.33 percent since then, with some communities falling more than that. It is no wonder that so many of us feel a little poorer today.
Which brings me back to the “permanent income hypothesis.” I am certain that people’s perceived lack of wealth is having an impact, making our recession that much worse. Businesses and consumers are less likely to spend when they are anxious about their economic future and when they perceive themselves to be less well off financially. Real consumption fell 4.32 percent and real private investment declined 20.78 (both on an annualized basis) in the fourth quarter of 2008. (Consumers did increase their spending in January, but some have attributed this to cashing in gift cards.) Meanwhile, real GDP declined 6.2 percent during the same time period. Today brought more bad news that the unemployment rate has grown to 8.1 percent, with 4.4 million Americans losing their jobs since December 2007.
I asked small businesses on Linked In if their decrease in wealth impacted their plans. Only a few people responded, but those that did said that it had not altered their overall business. I suspect that there are others who would say the opposite. What are your thoughts? Has it impacted you? Here is a poll to see what you think. Feel free to comment, as well.
Many of you will remember Christina Olachia, who participating in my blog book tour in January. She has battled triple-negative breast cancer, much as my late wife did, and she writes the blog, The Uniboob Club. Christina approached a number of us about “A Month of Caring and Sharing.” During the month of March, she wanted to have a series of guest bloggers each day telling their stories. It should be an interesting month. Hopefully, you will follow along, starting tomorrow. My story will appear on Wednesday, March 11.
What’s New – SBA Office of Advocacy