What has happened to small business investment spending?

Conclusions

Thoughtful citizens are rightfully concerned about the apparent sluggishness of total investment spending. Perhaps they should also be worried about who is doing the investing; the evidence presented in this paper indicates that in manufacturing there has been an increasing dominance by the largest 1000 firms during the last 15 years. This is due to an increasing share for the larger firms in total sales and to their relatively easier access to credit. While the regression results are significant, much more work needs to be done if we are to have an entirely satisfactory explanation of this phenomenon.

If these results are confirmed, they will raise serious issues for public policy. Our nation's leadership in economic affairs and the high standard of living enjoyed by its citizens are largely a result of high productivity and technical change. No doubt our national mythology ascribes too important a role to the individual entrepreneur, but it is important that this avenue to progress be kept open. The largest firms have impressive talent and facilities, but they are not omnicient: Western Union was not interested in the telephone, and Kodak initially passed up instant photography. We will all pay if the economic or financial structure of the economy fails to offer support to those individuals, rare though they may be, who possess profound ideas but only modest finanial resources.