2.Give the summary of the text The Contributions of Small Business1

Many small manufacturing firms produce important components on which the giant man­ufacturers are absolutely dependent. Most large manufacturers in the automobile, household appli­ance, telecommunication, computer, and aero-space industries subcontract with small parts pro­ducers. For instance, General Motors purchases a wide variety of parts—ranging from door handles to light fixtures—from more than 25,000 firms, each of which employs fewer than 100 employees. Because they specialize in items which large firms find costly or troublesome to produce, these small manufacturers have become a vital link in the chain of production.

Small retail, wholesale, construction, and service firms, on the other hand, tend to focus on local needs that might not otherwise be serviced by big business. For example, large chain food, restaurant, and dry goods stores calculate that cer­tain population and income thresholds² must exist before they will open branches. These figures are based on their high-volume sales approach. Smaller enterprises can fill the cracks left by such mass retailing. Without small business, many iso­lated rural and inner city areas (which big busi­nesses have generally shunned³) would be without essential retail and service operations.

Small firms are also important in providing new products and new marketing techniques. Surprisingly, for all of the millions of dollars spent on new product development and research by the giants, their record for invention and innovation is not impressive. Remember, too, that many of the giant industries—automobile, aircraft, cosmetics, and electronics, for example—started as small businesses exploiting and developing a new idea. In recent times, in the electronics and telecommuni­cations industries especially, small businesses have been the source of important technological break­throughs. Similarly, in marketing, small businesses have been the primary developers of new market­ing techniques. For example, the fast-food concept was initially developed by small businesses, not by Howard Johnson's or other large food chains. Big businesses have a strong inclination⁴ to shy away⁵ from new ideas and approaches. New ideas are risky, and only a few are profitable. Again, small enterprise fills the need by undertaking risks that are unacceptable to big business.

THE CHARACTERISTICS OF SMALL BUSINESS

Of the 14 million American entrepreneurs classified as small businesses, about 38 percent are part-time entrepreneurs. Another 24 percent are full- or part-time operating farmers. Thus, only about 38 per­cent or 5.2 million enterprises, including 1.6 million single person enterprises, constitute our small busi­ness population—about one full-time enterprise for every 200 Americans.

Small business can be found in virtually every industrial classification. However, most are in retail sales or services. The reasons are not difficult to understand. First, retail operations and service enterprises have attracted comparatively little attention from those who have an "urge to merge⁶." Relatively few savings (econo­mists call it "economies of scale") have resulted from developing a national chain of haircutting salons, specialized clothing stores, or travel agen­cies. Consequently, there has been little reason to consolidate many individual enterprises into a few big ones or for a giant firm to develop hundreds of outlets in retail or service operations.

Another reason for small business develop­ment in these two areas involves problems of entry barriers (requirements to get a business under­way⁷). Retail and service barriers are low. They require comparatively little start-up or risk capital (funds essential for getting the business off the ground⁸). Obviously construction, manufacturing, mining, and transportation and communications have very high entry costs; they require vast outlays for machines, buildings, and raw materials. This last group of industries also usually faces barriers re­sulting from already established enterprises in the fields. For instance, the small commuter⁹ airline will have to compete with Greyhound, Trailways, and perhaps even large passenger air carriers. However, these barriers are formidable, but not prohibitive. Nevertheless, they do discourage many would-be¹⁰ entrepreneurs.