Potential for Up to $200 Billion in Added Economic Growth Uncovered in Survey of Small Businesses

WASHINGTON, March 16, 2004 — The U.S. economy could potentially gain up to $200 billion in economic growth from increased use of computers by minority- and women-owned small businesses, according to a new survey of small-business owners in six major U.S. cities.

Kim Tubbs-Herron, business and marketing officer at Microsoft, discusses the positive impact technology can have on minority- and women-owned businesses, March 16, 2004 in Washington D.C. Click image for high-res version.

The survey of more than 1,100 small-business owners, 75 percent of them women or minorities, found that those making extensive use of computers and other information technology are significantly more successful. On average, such firms experienced substantial increases in productivity and profitability over those not fully utilizing computers. Computer-savvy companies also employed significantly more workers.

Increasing computer use by minority and women small-business owners could potentially have a significant, positive impact on the U.S. economy, say researchers at the Urban Institute, a nonprofit, nonpartisan economic and policy research organization that conducted the survey for Microsoft Corp. The Urban Institute study estimates that greater use of technology in minority- and women-owned businesses could possibly add up to $200 billion to the nation’s gross domestic product.

Harnessing technology could potentially also help close the entrepreneurial gap affecting women and minorities. Compared with white males, they are less likely to own businesses, and face special challenges, such as more difficult access to credit and a lower survival rate, when they do. Previous studies* have found that minority- and women-owned businesses generate far lower sales and are less likely to survive.

The Urban Institute survey found that minority- and women-owned small firms making little use of computers could potentially gain sizeable annual production.

“The findings from this study should be encouraging for all entrepreneurs contemplating whether investing in technology will help their business. The answer is a resounding ‘yes,'” said Harriet Michel, president of the National Minority Supplier Development Council. “The findings are also a wake-up call for policymakers, that supporting the technology interests of small minority- and women-owned businesses can strengthen our nation’s economy and help create jobs.”

The Urban Institute surveyed small businesses in Chicago, Los Angeles, Miami, New York, Seattle and Washington. In addition to interviewing more than 1,100 small-business owners by telephone, researchers conducted 45 in-depth field interviews with owners at their place of business.

The six-month research project was funded by Microsoft as part of its ongoing commitment to extend the benefits of technology to underserved people and businesses.

“This research is one more step in our effort to ensure that small businesses everywhere have a chance to succeed,” said Bill Gates, chairman and chief software architect of Microsoft. “There are many challenges on the road to success. Technology should not be one of them. In fact, technology should be a great equalizer, enabling these companies to level the playing field and compete like never before.”

Many businesses surveyed reported using computers in their accounting (68 percent) and for e-mail to attract or interact with customers (43 percent). Many also reported having a Web site (42 percent). More successful small businesses reported using technology to improve office operations, service, product delivery and financial controls.

“By showing that productivity is enhanced with more extensive use of computers across a greater array of business functions, this study suggests one way to help more minority- and women-owned businesses succeed and become more prominent in the world of small business,” said the director of the study, Dr. Robert Lerman, senior fellow at the Urban Institute and professor of economics at American University.

The study found that the cost of technology does not appear to be a major barrier to its wider adoption. Only 20 percent of surveyed small-business owners believe that technology is unaffordable. Researchers also found no significant differences in technology use among minority and women business owners, compared with white male business owners.

A more significant factor than cost may be a lack of skills or access to training. The survey found that nearly half of the business owners said they lacked or were uncertain of their computer skills. Many entrepreneurs reported relying on friends and family as their main source of technical support, although social networks may not be able to provide extensive advice on using technology for strategic advantage in business.

“Making these communities more technology-competent will probably require more education, training and technical support, but our study suggest such efforts will pay dividends in the form of improved business practice and business performance,” Dr. Lerman said.

Over the past three years, Microsoft has worked with national and regional groups to increase awareness about the benefits of technology for minority- and women-owned smallbusinesses. Microsoft has held hundreds of technology workshops, providing more than 50,000 small-business owners with hands-on training, and worked with key community groups to demonstrate products and services and provide information about the advantages of technology.

About The Urban Institute

The Urban Institute ( www.urban.org ) is a nonprofit, nonpartisan research and educational organization that uses rigorous, state-of-the-art methods to analyze public policies and programs, bringing sound, objective evidence to issues and challenges confronting the nation.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

* Federal Reserve Board 1998 Survey of Small Businesses; “Race and Gender Differences in Business Ownership and Business Turnover: An Empirical Study Using a New Unique Data Series,” Richard J. Boden and Brian Headd, Business Economics, October 2002

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