Transcript The US

SMEs adaptive behavior in the modest
growth environment of 2010-2013:
Implications for innovative SME
VUZF University
October 1 , 2013
Sofia, Bulgaria
Giuseppe Gramigna
Chief Economist
U.S. Small Business Administration
[email protected]
1
Summary
1. Hypothesis: SME’s have adapted to the modest growth
environment of the 2010-2013 period, by conservatively increasing
their use of labor, capital, and credit, all the while increasing their
profits.
2. This adaptive behavior, while positive in the long-run, has had
dramatic impact on net firm formation, and may be indicative of a
performance bifurcation even among SMEs, where the strong get
stronger and the other exit the market.
3. A comparative analysis of the US and the EU experience.
2
The Current Policy Question
1.
In this environment the critical policy question is which SME exited the
market? Were they (1) the less efficient, or were they (2) the risk
takers?
2.
Answer 1: The most efficient firms survived and the less efficient exited the
market. Thus, policy makers and financial institutions should work with
existing firms and new entrants. -- Growth along existing economic activities
(paths) and with existing firms!
3.
Answer 2: Conservative firms survived and the risk takers exited the
market. Thus, policy makers will need to re-grow innovative SMEs with high
risk preferences, and financial institutions would also need to find additional
risk takers, as their portfolio may be “risk deficient” given a predetermined
risk preference -- Growth via new markets and with new firms.
The Cause: Real GDP: Actual vs. Potential
Growth Rates (RGDP):
Actual/Potential Ratio:
Post Recession 2.1% vs. Historical 3.5%
94% vs.
99%
4
Adaptive Behavior : A Similar Gap Exists in the Labor Market.
5
Low Labor Turnover: (Layoffs at historical lows, but hiring not
returned to pre crisis level) indicative of adaptive behavior.
6
The Number of Firms Declined During The Great Recession.
7
Adaptive Behavior (2): Corporate Profits
Historical Highs Levels (Top Graph) and Margins (Bottom Graph).
8
Profit Margins have rebounded at Large and Small Firms.
9
Manufacturing Sector’s Profit Margins Rebounded for All Size
Classes.
10
The Impact on SMEs: The Credit Markets
11
SBA Loan Guarantees:
(a) Dollar Value Guarantees Have Surpassed Pre-Recession Levels;
(b) Number of Guarantees Are Still Lagging.
12
The US and EU SME Environment and Adaptation
The US:
1. federal government undertook fiscal expansion programs, partly
counteracted by balance budget constraints in some states;
2. Regional shift in production and labor in the 1970-1990 period;
3. Experienced greater reduction in employment and number of firms;
4. And higher profits (levels and margins).
The EU:
1. National governments undertook fiscal contractions and structural reforms of
various degrees;
2. Regional shift in production and labor from Southern Mediterranean
countries and toward Northern Europe;
3. Experienced lower reduction in employment and number of firms;
4. And lower profits (levels and margins).
5. Significant difference among member countries.
13
14
Significant Regional Difference in Real GDP Performance.
15
Employment Reductions in the US were Higher than the EU.
16
Firms Reductions in the US were Higher than the EU.
17
Significant Regional Difference in Employment and FirmFormation Trends.
18
Profit Comparison:
EU Declining; US Rising; EU Still Higher than US.
19
Significant Regional Difference in profit Performance.
20
Questions?
21