Small business provides innovation. Entrepreneurs start businesses based on new ideas they believe the market is lacking. While many of these businesses may fail, some will move onto become star performers. Others will be bought out by larger companies and others will have their ideas and patents bought out. The entire process leads to new knowledge being dispersed throughout the system.
Medium level businesses have reached a critical stage where they are growing. Often these are the business that hire lots of employees as they speed up production to meet needs. Their expansion efforts lead to economic growth in the region as they seek to become star performers and large companies. Retaining them in an area, even if they expand globally, leads to higher benefits in the area.
Large companies are currently successful but as their structure grows to support their business operations they often begin to slow down in innovation and development. They move through stages that eventually need to be rejuvenated or they begin to decline. Small business are often incorporated into their operations to enhance their current products and services.
Such mamouth companies often invest in supply chain and other innovations that help them coordinate their large structures. This is where the magic happens as companies begin to coordinate their efforts, anchor around major producers, and develop/draw human capital into the area. They eventually solidify clusters into a working unit.
Governments sometimes focus on the big businesses because of ease of discussion and their visibility. Large companies can contribute significantly to candidate elections, provide available research findings, and in general can negotiate with government. Thus they have an inherent advantage in the system and can skew the political process. Therefore, politicians need to understand that supporting these big businesses is helpful but they must ensure they are also supporting small and medium businesses for the long-term viability of their economy. There should be a balance between all three that leads to maximum growth potential.