Exit Rates of Small Wholesalers Increase in U.S because of International

Posted on September 16, 2010 by

SBA conducted a study, with an aim to examine the consequences of international pressures on small business firms, still further on wholesalers and retailers. It revealed that, in the case of manufacturers, the exit rates of small wholesalers increased in the form of real exchange rate appreciation, due to international pressure.

Key findings
• Among the four firm sizes, the annual establishment exit rates (the percent of closed establishments divided by the total number of establishments) were on average about 2 percent higher in retail sector than those for the wholesale sector.
• The annual exit rates were higher for small businesses which had consistent business turn over.
• The present economic situation, changes in gross domestic product, employee compensation, interest rates, business cycle and cost pressures affect exits.
• According to econometric models, the dollar appreciation rate has negative effects on wholesalers, whose success is mostly dependent on domestic manufacturers.
• International pressures in the form of changes in real exchange rate did not show major effect on small retailers except for small auto dealers. This indicates that auto dealers are more related to domestic manufacturing than to imports.
• The exit rate of very small retailers having 1 to 9 employees, increased proportionately with the growth of retailers with more than 500 employees.
• Small wholesalers did not show any signs of crowding-out effect from the large wholesalers having more than 500 employees.

Comments are closed.