According to latest Census data, the number of U.S. exporters has climbed from 275,000 in 2009 to 302,000 in 2013. These companies, as we have commented earlier, are over and again found to outperform non-exporters across metrics, including productivity revenue growth, and stability: they, in short, make a strong investment proposition.
Ohio State / GE Capital’s National Center for the Middle Market has offered further evidence of the fact that exporters and outperformers are one and the same. In a 2011 study on U.S. middle market companies ( firms with $10m-1 billion in revenue), the Center showed that the best performing companies are also ones that are most actively pursuing international opportunities (figure 1). These findings are echoed in rigorous studies around the world.
Figure 1 - Growth and Globalization Correlate: Highest-Growth U.S. SMEs Are Most Globalized
In a Q2 of 2014 survey, the Center found that over 76 percent of middle market exporting companies reported past year revenue increases, compared to 64 percent of non-exporters.
Today the Center issued a new study on the state of American middle market exporters, in partnership with the Brookings Institution. The study points out that the latest data show there are almost 200,000 middle market companies. While most companies are smaller and middle market companies account for only 3 percent of all businesses in the United States, these firms created 70 percent of all jobs in 2013, and collectively generate about one-third of all private employment, and of U.S. GDP. Yet middle market companies punch way below their weight, the study finds. Only 40 percent of middle market export, and these companies make up only nine percent of all U.S. exports.
Those companies that do sell internationally realize a number of gains. In another study run by the Economist Intelligence Unit, the Institute found that middle market executives see various critical benefits in expanding to global markets, above and beyond revenue and growth gains (figure 2):
- Long-term growth gains (59 percent of respondents)
- Spreading business risk across more than one market (43 percent)
- Keep up with competitors doing the same thing (24 percent)
Figure 2 - Which have been the greatest drivers for your company to plan activity in foreign markets?
Research around the world concurs with these notions. Companies that sell internationally are not only better to begin with – exporting and international competition makes them better and smarter. After all, facing global competitors, companies need to develop world-class products and services, take advantage of economies of scale, improve manufacturing and logistics, and hire the best and the brightest.
What, then, holds 60 percent of the middle market back from global markets? According to the latest survey, 57 percent of surveyed middle market firms say they need the right talent to pursue exporting, and 49 percent cited lack of capital as a key constraint (figure 3). Some middle market companies may find that the local banks on which they have chiefly relied for capital themselves lack international capabilities. In addition, 39 percent say they require leadership commitment in order to grow exports.
Figure 3 - Which have been the greatest drivers for your company to plan activity in foreign markets?
We at TradeUp are working to helps all U.S. middle market companies overcome these hurdles, so as to realize themany growth gains from exprts. We see the middle market exporters as the future key engine of American exports: these businesses have proven capacity for competing and exporting a range of goods and services desired in overseas markets. Now they need capital and smart road maps. TradeUp helps these companies in three ways:
1. Offering a robust marketplace for middle market companies to navigate and tap accredited investors – funds, angel investors, banks, alternative lenders, government trade agencies
2. Providing access to a 3rd party network of service providers in international through our TradeHub network of pre-screened trusted partners we are about to launch
3. Offering world-class export strategy and risk management services.
Stay tuned as we expand these services, and feel free to touch base with us with your comments!