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BRT Study Shows America’s Large and Small Businesses Critical Partners in Economic Recovery

Washington – Business Roundtable, an association of chief executive officers of leading U.S. companies, today released a report demonstrating how small and large businesses work together to help each other and to strengthen the U.S. economy. The study found that, on average, each large U.S. corporation purchases more than $3 billion worth of goods and services from American small businesses. Collectively, these large firms generate an estimated $1.5 trillion in sales for small businesses annually.

“This study underscores that the supplier-buyer relationship between American small businesses and large U.S. multinationals is a fundamental and entrenched aspect of our economy. Large companies are major customers of small businesses and play a critical role in their growth and success. American business – small and large together – drives economic growth and job creation,” said Ivan Seidenberg, Chairman of Business Roundtable and Chairman and CEO of Verizon Communications.

The study found that:

  • Parent operations of U.S. multinational companies buy nearly a quarter of all the goods and services they use as inputs in their production from U.S. small businesses – more than an estimated $1.5 trillion annually; and
  • Every $1 billion in new exports by large U.S. companies would result in approximately $174 million in new purchases of goods and services from America’s small businesses.

"Small businesses are critical to large manufacturers’ supply chains. For instance, every time a Boeing 777 lands anywhere in the world, it arrives with more than three million parts reflecting the workmanship of thousands of small, medium and large suppliers, the vast majority of which are from the United States,” said Jim McNerney, Chairman, President and CEO of The Boeing Company, which has about 22,000 suppliers. “Small American companies and their workers helped the U.S. aerospace industry export about $83 billion in products and contributed a positive balance of nearly $65 billion to U.S. trade in 2009.”

Among survey respondents, members reported purchasing goods and services from an average of more than 6,000 small businesses every year. The information released in this study is the first of its kind and not available elsewhere. Government agencies do not collect data on the links between small and large business and the impact of their interconnectivity on the economy.

“Large and small businesses share the common goals of helping restore long-term economic growth and creating new jobs. With large and small businesses deeply embedded in the American economy through their partnerships, it is critical that public policies are designed to encourage growth and job creation for all companies in the United States, not just firms of a certain size,” said Larry Burton, Executive Director, Business Roundtable.

The study was based on a May-June 2010 survey of Business Roundtable member companies across a wide range of industries, including IT, telecommunications, finance, retail, transportation, health care and manufacturing.

“U.S.-based multinationals spend more than $6 trillion annually – about 70 percent of their total sales – on goods and services used as inputs for their own production. Nearly 89 cents of every dollar spent on these goods and services are paid to U.S. companies, with about a quarter of that going directly to the very small businesses who are struggling to generate sales,” noted the report’s author, Matthew J. Slaughter, Associate Dean of the MBA program and Signal Companies’ Professor of Management at the Tuck School of Business at Dartmouth.

This partnership with large companies is crucial to the economic health of small businesses. According to a recent survey by the National Federation of Independent Business (NFIB), the leading association representing small and independent businesses, small business owners cite poor sales as one of their top challenges. With large business purchases comprising nearly 13 percent of all small business sales, ensuring the health of large companies is critical to the success of small companies.

The full text and findings of this report can be found by clicking here.