The Positive Impact of Local

Businesses on the Economy

Introduction

The importance of local businesses in the overall economic landscape

cannot be overstated. These businesses are the driving force behind the
development and growth of local economies, providing numerous
benefits to communities and the nation as a whole. This essay will
explore three main ideas on the positive impacts of local businesses on
the economy: the promotion of economic growth, the support of local
communities, and the enhancement of environmental sustainability.
Each idea will be supported by three reasons, backed by evidence from
various sources.

I. Promotion of Economic Growth

A. Job Creation

Local businesses are significant contributors to job creation within their

communities. According to the U.S. Small Business Administration (SBA)
(2018), small businesses were responsible for creating 1.9 million net
new jobs in 2015. This figure represents 64% of total net new jobs
created in the United States during that period (SBA Office of Advocacy,
2018). This demonstrates the crucial role that local businesses play in
providing employment opportunities and stimulating economic growth.

B. Revenue Generation and Tax Contributions

Local businesses generate revenue that circulates within the local

economy, thereby contributing to economic growth. Mitchell (2011)
states that locally owned businesses recirculate a larger share of their
revenue within the local economy compared to national chains.
Additionally, local businesses contribute to the tax base of their
communities. As reported by the Institute for Local Self-Reliance (ILSR)
(2012), local businesses generate more tax revenue per sales dollar
than national chains, thereby providing municipalities with the resources
needed to fund public services and infrastructure.

C. Innovation and Entrepreneurship

Local businesses foster innovation and entrepreneurship, which are vital

components of economic growth. The SBA (2018) highlights that small
businesses produce 16 times more patents per employee than larger
businesses. This demonstrates the pivotal role that local businesses play
in driving innovation and technological advancements. Furthermore, the
presence of local businesses encourages aspiring entrepreneurs to start
their own ventures, creating a vibrant and dynamic economic landscape
(Shane, 2012).

II. Support of Local Communities

A. Strengthening of Social Bonds and Civic Engagement

Local businesses contribute to the strengthening of social bonds and

civic engagement within communities. Talbot (2013) asserts that locally
owned businesses foster social capital by building relationships among
neighbors, business owners, and community members. This, in turn,
results in increased levels of trust and collaboration, which promote
community resilience and well-being.

B. Preservation of Local Identity and Culture

Local businesses play a key role in preserving the unique identity and
culture of communities. As Mitchell (2011) notes, locally owned
businesses often showcase the distinctive characteristics of their
communities, thereby contributing to a sense of place and fostering
local pride. Moreover, local businesses often support local artists,
musicians, and cultural events, further enriching the cultural
landscape of their communities (ILSR, 2012).

C. Support for Nonprofits and Community Organizations

Local businesses often provide support to nonprofits and community

organizations, which are essential for maintaining the social fabric of
communities. According to the ILSR (2012), local businesses donate
more than twice as much per sales dollar to local nonprofits compared
to national chains. This philanthropic support contributes to the overall
well-being of communities and helps address various social challenges.

III. Enhancement of Environmental Sustainability

A. Reduced Environmental Footprint

Local businesses often have a smaller environmental footprint than

national chains due to their smaller size and proximity to customers. As
reported by the ILSR (2012), local businesses typically use less land,
consume fewer resources, and generate less waste than their larger
counterparts. Additionally, local businesses often source their products
and materials from nearby suppliers, reducing transportation-related
emissions and contributing to a lower carbon footprint (Mitchell, 2011).

B. Promotion of Sustainable Practices

Local businesses are more likely to adopt sustainable practices, given

their close ties to the community and the environment. As Talbot (2013)
observes, local business owners are more likely to be aware of and
responsive to local environmental issues, resulting in a greater
likelihood of implementing eco-friendly practices. Furthermore, local
businesses often serve as models for sustainable business practices,
inspiring other businesses and consumers to adopt similar measures
(Shane, 2012).

C. Support for Local Food Systems

Local businesses, particularly those in the food and agriculture sector,

play a vital role in supporting local food systems. By sourcing their
products from local farmers and suppliers, local businesses help to
create a more resilient and sustainable food system while also reducing
the environmental impacts associated with long-distance transportation
of goods (ILSR, 2012). Moreover, local businesses often promote and
educate consumers about the benefits of locally sourced and
sustainably produced food, thereby contributing to the growth of
the local food movement (Mitchell, 2011).
Conclusion

In conclusion, local businesses are integral to the economic well-being

and sustainability of communities. By promoting economic growth,
supporting local communities, and enhancing environmental
sustainability, these businesses contribute significantly to the overall
health and prosperity of the nation. Therefore, it is crucial to recognize
and support the invaluable role that local businesses play in shaping the
economic landscape and fostering a more resilient and sustainable
future for all.

References

Institute for Local Self-Reliance (ILSR). (2012). Key studies: Why local
matters. Retrieved from https://ilsr.org/key-studies-why-local-matters/

Mitchell, S. (2011). The benefits of doing business locally. The Guardian.

Retrieved
from https://www.theguardian.com/sustainable-business/blog/benefits-
business-local

Shane, S. (2012). The importance of small businesses to local

economies. Small Business Trends. Retrieved
from https://smallbiztrends.com/2012/12/importance-small-business-
local-economies.html
Small Business Administration (SBA) Office of Advocacy. (2018). 2018
Small Business Profile. Retrieved from https://cdn.advocacy.sba.gov/wp-
content/uploads/2019/04/23142719/2018-Small-Business-Profiles-
US.pdf

Talbot, D. (2013). The economic and social benefits of locally-owned

businesses. Sustainalytics. Retrieved
from https://www.sustainalytics.com/esg-blog/economic-social-
benefits-locally-owned-businesses/