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What Do Small and Large Business Mean to Each Other?

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Greg-likes-this-pic-147x150.jpgThe economic benefits, both direct and indirect, which small and large businesses provide each other are often misunderstood. Very few small and large businesses operate alone. Most create an amazing ecosystem full of interdependencies and complex collaborations that generate revenue to sustain and create jobs.

This week, the U.S. House Committee on Small Business held a hearing to better understand the significant benefits that result from collaborations between large and small businesses. Bob Bruck, an Intel Corporate Vice President and General Manager of our Technology Manufacturing Engineering organization, testified on the significant economic impact of Intel’s large supply network and investments in small businesses. He provided concrete examples of U.S. jobs that were saved and small businesses that grew as a result of Intel’s technical assistance, monetary investment, and/or product demand. One example pertained to our strategic collaboration with Energetiq Technologies, a supplier of critical technologies to some of Intel’s larger tool suppliers.

Intel grew from a small startup to a Fortune 50 company as a result of sales to large customers. Today, our company still supplies many of the same customers it has for decades, but the nature of Intel’s products has required an increasingly complex and growing supply chain.

Intel has about 10,000 suppliers worldwide. More than half of these suppliers are in the U.S., with approximately 2,200 of them classified as small businesses. In the last decade, we have spent $68 billion on our U.S. operations, R&D and manufacturing. In 2011 alone, Intel spent more than $3 billion on goods and services purchased from American small businesses in industry sectors that range from the supply of chemicals and gases to construction services. Such spending is growing these small businesses and creating jobs.

Don’t just take our word for it. The value of both small and large firms to the U.S. economy is evident from the data. According to the Small Business Administration, small businesses account for 99.7% of all business in America; employ half of all private sector employees (43% of high tech workers); and generated 65 percent of net new jobs over the past 17 years. Matthew Slaughter, an economist who also testified yesterday, noted that in 2009 the U.S. operations of U.S. based multinational companies (which account for only 0.3% of all business in America) made 40.9% of all private-sector non-residential capital investment and are responsible for 71.15% of all goods exported to the rest of the world. In addition, these companies performed 84.2% of the total U.S. R&D and paid over $1.9 trillion in wages, with a per worker average of $69,796, about 25% above the private-sector average.

The value and interdependency of small and large businesses is evident by the fact that in 2008 U.S. parent operations of U.S.-based multinationals purchased $6.33 trillion in parts and components, with nearly 90% bought from other companies in the U.S.

As the U.S. government considers various policies to increase the competitiveness of American companies (for example tax reform), it should carefully evaluate the potential impact those policies may have on our dynamic and complex business ecosystem.