The Daily Stat from Harvard Business Review

 

December 9, 2014 Government Support of Small Firms Ends Up Being a Drain on the Economy Government loan guarantees for small businesses have the effect of depressing income growth, according to a study of 3,035 U.S. counties from 1980—2009 by Andrew T. Young of West Virginia University and three colleagues. For the average county, a $3.43 per capita increase in Small Business Administration loans is associated with a cumulative decrease in annual income-growth rates of about 2 percentage points. Small firms tend not to be engines of growth, the researchers say: Past studies have found that most people who become small-business owners do so not to introduce new ideas or enter new markets but just to satisfy a personal desire for autonomy. SOURCE: The Direct and Indirect Effects of Small Business Administration Lending on Growth: Evidence from U.S. County-Level Data

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