The system of “creative destruction” denotes constant births and disappearances of companies across time and technologies, as new ideas spur entrepreneurs to set up shop to meet changing consumer needs. This process is a sign of innovation and dynamism. The American economy is characterized by a great number of small firms, which shows that entrepreneurship holds up well. Not only is there no stigma attached to modest size, but smaller companies tend to react quickly to a changing economic environment and may offer better opportunities for internal advancement for their workforce. Over time, the expansion of markets and improvements in productivity allow companies to grow in size. Some will die young while others will join the ranks of medium-sized entities.
The largest cohort of manufacturing firms is composed of those employing up to four people. Next in the ranking are companies with 5-9 workers and 20-99 workers. By far, the smallest cohort is made up of the largest companies, i.e., those employing more than 500 people.
Small size does have its downsides; for example, undersized companies tend to offer fewer benefits to workers and are less likely to export.