Chapter 2: Small and Medium Businesses: A Diverse Population

As we have seen, there are far more small businesses in the American economy than big businesses, although small businesses account for a less-than-proportional mass of production and employment; this is no less true in most countries. Indeed, the small business sector is itself very diverse. Small and medium enterprises as we have defined them include non-employer proprietorships and partnerships and employers of 1–500 employees. Certainly, an employer of four or five will operate quite differently than an employer of 45–50, which again will operate differently than an employer of 400 or 450. At the same time, the boundaries between the different size categories are blurry and arbitrary. An employer of 95 may be categorized as a small employer and an employer of 105 as a medium-size enterprise, but they are likely to be more similar in their operation. This is a problem not only for classification but also for statistics: how may we summarize the statistics of such a diverse population of business firms?