Administration,” U.S. Small Business Administration, research/rs335tot.pdf , (accessed August 30, 2011). Over the years, the list of important innovations by small firms has included the airplane and air- conditioning, the defibrillator and DNA fingerprinting, oral contraceptives and overnight national delivery, the safety razor, strobe lights, and the zipper.William J. Baumol, “Small Firms: Why Market-Driven Innovation Can’t Get Along without Them” (U.S. Small Business Administration, Office of Advocacy, December 2005), table 8.1, 186, (accessed October 10, 2008). Small business owners are also particularly adept at finding new ways of doing old things. In 1994, for example, a young computer-science graduate working on Wall Street came up with the novel idea of selling books over the Internet. During the first year of operations, sales at Jeff Bezos’s new company—Amazon.com—reached half a million dollars. In less than twenty years, annual sales had topped $34 billion.Yahoo.com, Amazon Income Statement, q?s=AMZN&ql=0 (accessed August 30, 2011). Not only did his innovative approach to online retailing make Bezos enormously rich, but it also established a viable model for the e-commerce industry. Chapter 5 The Challenges of Starting a Business 5.2 The Importance of Small Business to the U.S. Economy 224
Why are small businesses so innovative? For one thing, they tend to offer environments that appeal to individuals with the talent to invent new products or improve the way things are done. Fast decision making is encouraged, their research programs tend to be focused, and their compensation structures typically reward top performers. According to one SBA study, the supportive environments of small firms are roughly thirteen times more innovative per employee than the less innovation-friendly environments in which large firms traditionally operate.William J. Baumol, “Small Firms: Why Market-Driven Innovation Can’t Get Along without Them” (U.S. Small Business Administration, Office of Advocacy, December 2005), (accessed October 10, 2008), 187. The success of small businesses in fostering creativity has not gone unnoticed by big businesses. In fact, many large companies have responded by downsizing to act more like small companies. Some large organizations now have separate work units whose purpose is to spark innovation. Individuals working in these units can focus their attention on creating new products that can then be developed by the company. Opportunities for Women and Minorities Small business is the portal through which many people enter the economic mainstream. Business ownership allows individuals, including women and minorities, to achieve financial success, as well as pride in their accomplishments.
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