After the war, companies will again look to do business overseas. Some should hold off, however. A new study found that firms with fewer than 20 employees do not have the manpower, resources, or capacity to export profitably. The report, published in the Journal of Small Business Management, examined 2,822 companies in 49 industries in South Carolina, a heavy exporting state.
Among the handicaps: Smaller firms are hit disproportionately hard by fixed nontariff costs, such as port fees, which do not take the amount of production or export into account. And the fewer employees a company has, the fewer people it can devote to strategic planning. Only a few companies have managed to buck the trend. CollinsCraft Composites, a 12-person fiberglass manufacturer based in Walhalla, S.C., derives 5-7% of its revenue from Mexico. During a state trade mission, the company lined up a key distributor, which made exporting feasible.
John Mittelstaedt, the study's lead author, notes that companies with 20 to 100 employees perform relatively well in international markets. And companies with more than 100 on the payroll can compete with major manufacturers. But "if you are in that under-20 category," he says, "my advice is don't think about exporting right now."