A history of entrepreneurship and small business in America

A small business, as defined by the U.S. Small Business Administration (SBA), refers to a privately owned business that may take the form of a corporation, a partnership or a sole proprietorship. The threshold for what could be considered a small business varies by industry, but generally, it is a business with fewer than 500 employees. Small businesses have long been an integral part of the U.S. economy. They drive innovation, create jobs and foster economic flexibility. They are also responsible for creating two thirds of all new jobs in the U.S. annually. There is nothing small about the impact of small businesses, and America owes so much to the hard workers and hustlers who create small, independent businesses to fill various needs within their local economy. Owners of businesses of all sizes can be proud of the contribution they are making to their communities, knowing that their industriousness is part of what drives the larger U.S. economy and contributes to our health as a nation.

Small businesses and the U.S. government

The relationship between small businesses and the U.S. government is deeply symbiotic. Small businesses contribute significantly to the democratization of the economy, spreading economic power out among a growing number of entrepreneurs and chipping away at the power and influence held by large corporations. This dispersal supports a democratic society by providing multiple sources of employment, varied services and products, and diverse ideas. It pushes other business owners to strive for excellence in their products and services, knowing that staying competitive is important to their growth and success.

The government’s influence on small businesses is evident through regulations, tax policies and direct support mechanisms, such as loans and grants. Programs such as those offered by the federal Small Business Administration exemplify government efforts to bolster small business growth and sustainability, acknowledging their role as the backbone of the American economy. Tax benefits for small-business owners are another way in which the U.S. government supports small businesses. The Internal Revenue Service (IRS) offers tax deductions and credits to small-business owners in order to make the financial aspects of owning a small business more manageable. Federal contracting to engage small U.S. businesses in government-funded projects is also mutually beneficial for the government and small businesses, creating opportunities for growth within the economy.

Early American entrepreneurship

The landscape of early American entrepreneurship was marked by figures such as Benjamin Franklin and Thomas Edison, whose innovations and business acumen were foundational to the entrepreneurial spirit that characterizes American business. These early entrepreneurs capitalized on a growing nation hungry for new solutions and products, from Franklin’s ventures in printing and electricity to Edison’s developments in electric light and audiovisual technology. Their work not only shaped their destinies but also laid down the industrial and innovation pathways for future business leaders.

The Industrial Revolution and its impact on small businesses in America

The Industrial Revolution of the late 1700s and early 1800s dramatically transformed the U.S. economy. People left their farmland and flocked to cities in search of new opportunities and livelihoods, shifting the economy from primarily agrarian to industrial. Large factories and mass production became prevalent during this time, but small businesses still played a vital role. They filled needs that larger companies could not or would not, providing specialized services and products to consumers interested in an alternative to mass-produced goods. Additionally, small businesses were critical in supplying components to larger manufacturers and in distributing their finished products. However, this era also presented challenges for business owners. Quickly advancing technology increased competition, and small businesses needed to adapt in order to stay ahead in the rapidly changing economic landscape. Industries that saw the most growth during this time period included manufacturing, transportation and communication.

Small businesses and Westward Expansion

In the 1800s, westward expansion in the United States created fertile ground for small businesses and entrepreneurs to thrive. As settlers moved across the continent, they needed goods and services that small businesses were quick to provide: General stores, saloons and repair shops sprouted up in burgeoning towns. These businesses were essential in supporting the infrastructure of new communities by providing necessary resources and employment. On top of that, the demand for agricultural and mining equipment catalyzed small-scale manufacturing on the frontier, furthering the importance of entrepreneurship and small businesses in the American West.

Entrepreneurship during the Great Depression

The Great Depression, a period between 1929 and 1939 characterized by economic hardship and failure, posed severe challenges for small businesses. As consumer spending plummeted and economic uncertainty prevailed, many small businesses were forced to close their doors. The failure of the American banking system during this time period made it incredibly hard for small businesses and entrepreneurs to obtain the capital needed to thrive, and small-business loans were all but impossible to secure. This greatly limited business growth and expansion. Small businesses resorted to external financing to cover the business expenses that they could not avoid.

However, the U.S. economy also saw a surge in entrepreneurial spirit during the Great Depression as people fought to provide for their families and communities in a variety of different ways. Necessity-driven entrepreneurship led to the founding of many companies that would go on to become industry giants in later years, including HP and Sara Lee. Government initiatives like the New Deal provided some support for small businesses and entrepreneurs, creating infrastructure projects that spurred new business opportunities and helped stabilize the economy.

Small businesses in a post-World War II economy

Following World War II, which ended in 1945, the U.S. experienced significant economic growth, which greatly benefited small businesses. After years of scarcity, Americans were eager to buy and eager to support the U.S. economy by buying American-made goods. This led to an increase in production across many different industries. From cars to home goods and appliances, manufacturing of American-made consumer goods surged, supported by technological advances that were first adopted for the war effort but found new and innovative uses in the post-war economy.

Government spending also remained high after World War II. The GI Bill empowered returning veterans to start their own businesses with the support of small-business loans, fostering a new wave of entrepreneurship. This period also saw a rise in franchise businesses, which allowed entrepreneurs to operate under established brand names, further expanding the accessibility and impact of small enterprises.

Silicon Valley and small tech businesses

The rise of Silicon Valley in the mid- to late-20th century is an important chapter in the story of American small businesses in the digital age. Starting with the semiconductor businesses of the 1960s and evolving into the software and internet businesses in the late 20th and early 21st centuries, this region of Northern California grew to become synonymous with tech entrepreneurship and e-commerce. Companies such as Apple, Google and Facebook started as small operations and grew into large corporations, inspiring a culture of tech startup entrepreneurship that emphasizes innovation and scalability.

The internet has democratized small-business opportunities around the world, allowing small businesses to compete globally from anywhere. With that, new segments of the marketing industry have developed to help online stores and small businesses compete effectively with brands of all sizes. The small-business landscape has never been more competitive, as consumers are free to make their purchasing decisions without the limitations of their location or their local economy.

Through all of these different periods in the history of the U.S. economy, small businesses have demonstrated resilience and adaptability, continuously evolving to meet the needs of consumers and reshaping the American economic landscape. Whether in times of boom or bust, small businesses and entrepreneurs remain a true testament to the enduring spirit of American entrepreneurship.

Additional resources

• Small Business in U.S. History
• The Role of Small Businesses in the American Culture and Economy
• Facts and Data on Small Businesses and Entrepreneurship
• Why Small Business Is the Heart of the Economy
• How Small Businesses Drive the American Economy
• The Importance of Small Business to the U.S. Economy
• Small Business Is Essential to Our Economy
• Small Business Is Good for Local Economies
• Six Ways Small Businesses Benefit Local Communities