Penn State Study Touts Benefits of Locally Owned Businesses

A new study by researchers at Penn State University demonstrates that counties with more locally owned businesses have faster growing incomes than counties with large businesses that are not owned locally, i.e. big box stores and large corporations with their headquarters outside of the community.  The study finds there is a significant positive effect between a county’s income growth and the presence of locally owned businesses.

The main reason for this as posited by Stephan Goetz, the study’s author, is that locally owned businesses are more inclined to utilize other small businesses based inside the community  (Goetz defines locally owned business as those with between 10 and 99 employees).  That is, local businesses hire local accountants to prepare their taxes, local attorneys to file paperwork, etc.  Large corporations are more likely to have in house employees do this type of work where the corporate headquarters is located, which is most often outside the local community

“This is really a story about start-ups,” said Goetz. “Many communities try to bring in outside firms and large factories, but the lesson is that while there may be short-term employment gains with recruiting larger businesses, they don’t trigger long-term economic growth like start-ups do.”.

http://edq.sagepub.com/content/early/2011/04/28/0891242411407312

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