A small firm survives in one of two ways. The first option is to become part of its industry value chain, such as a small equipment manufacturer supplying parts for a larger corporate plant. The first option we all understand and it plays a miniscule role in traditional economic modeling. Another factor marking small business as an economic change agent stems from small firms providing most of the innovation and market evolution. Although we know that the information technology and semiconductor industries were basically a result of small firm innovation, it is still surprising given that most small firms are limited in human and financial capital.
Job creation is also another area where small business has changed the economic landscape.
It is well known that almost all net new jobs during the last decade came from small business firms. It appears that small firms are efficient in a less obvious way. Small firms do certain things better than large firms. They provide more innovation, adjust more rapidly to changing market needs, supply the largest portion of entrepreneurship and eliminate economic stagnation. Researchers have also acknowledged that our American system incorporates both a democratic and an economic system, which are interdependent and interrelated.