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Reader Question: Is a strong small business sector important to the stability and growth of a nation’s economy?

Written by: Jon Hansen

Article Overview: In a word yes! And the critical role that public sector (government) policy plays in terms of being the primary link between successful domestic engagement and effective international cluster development cannot be underestimated.

Reader Question: Is a strong small business sector important to the stability and growth of a nation’s economy?

In a word yes!

And the critical role that public sector (government) policy plays in terms of being the primary link between successful domestic engagement and effective international cluster development cannot be underestimated.

From a domestic engagement perspective, public sector procurement practices are leading to an erosion of the overall supply base. This escalating level of erosion and its negative impact on innovation was initially presented as part of an October 2002 U.S. report by the Executive Office of the President.

Specifically, the practice of contract bundling which resulted in a steadily decreasing number of Small - Medium enterprises receiving federal contracts was seen as a direct threat to the nation’s pool of “innovation and creativity.” This of course has paved the way for newer legislation which has resulted in agencies such as NASA unbundling contracts in an effort to make business more manageable for small enterprises, or groups of small enterprises.

In turn, the strength of a supply base domestically (of which innovation is a key tenet), lays the foundation for a sound national economy by equipping suppliers to compete more effectively in the emerging global economy.

In fact, a 2006 presentation by the Foundation for Advanced Studies on International Development (FASID) asserted that globalization will ultimately “reduce the number of industrial clusters in the world in each industry.” FASID concluded that “in an era of globalization, only efficient industrial clusters can survive!”

Therefore, the inability to build strong clusters of innovation domestically will directly threaten a nations long term viability to compete globally in key industries.

There are of course numerous other studies which provide further insight into cluster development and the impact on innovation. If you would like to receive a copy of this information send me an e-mail at procureinsights@rogers.com with “Cluster” in the subject line.

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Article Tags: cluster development, critical role, e mail, executive office of the president, fasid, federal contracts, global economy, government policy, industrial clusters, innovation and creativity, key industries, national economy, negative impact, office of the president, procurement practices, public sector government, public sector procurement, small medium enterprises, term viability, unbundling



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