In the US, we pay periodic political homage to small business as the engine of economic growth. New employment really comes from young businesses, most of which also happen to be small – at least at the start. The US Census reports that during the past 30 years, nearly all net new job creation can be attributed to enterprises less than five years old.
Note: many young firms are founded with global expansion in mind. In addition to reasonable costs, they seek:
-- Market opportunities with no barriers to entry;
-- Speedy start-ups, with helpful service providers, business- friendly rules and regulations;
-- Human resources with potential to poach talented, experienced staff and ability to import and repatriate employees; and
-- Adequate, reliable infrastructure. IPAs looking to recruit young businesses will find several target-rich environments in the US:
-- Ethnic diasporas – a quarter of new high-tech companies in the US are founded by immigrants;
-- Universities – many schools have technology commercialisation programmes to help academics move their ideas from the laboratory to the marketplace;
-- Middle market – many Russell 2000 companies have global growth plans; and
-- Venture capital firms – some have portfolio companies that need equity to finance expansion.
Young companies may not move the global FDI needle very far, but the jobs and dynamism they bring will have a major impact.
Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world’s leading companies and served in the public sector as director of White House operations.