Small U.S. firms make big global sales

Many cite the boom in entrepreneurial immigrants with strong ties between the USA and their cultural homelands in Asia, Latin America, Europe and the Middle East.

Twenty-five percent of new U.S. technology and engineering companies that were launched from 1995 to 2005 have at least one founder who is foreign-born. Those firms hauled in $52 billion in sales in 2005, according to a study last year by Duke University and the University of California at Berkeley.

"You can go to almost any city in India, China, Saudi Arabia, Dubai — many economies in the world now — and see people buzzing with energy and entrepreneurship," says Vivek Wadhwa, a Duke University engineering professor and technology entrepreneur who has launched two start-ups. "There's a cross-fertilization of talent and a new sense of confidence."

An increasing number of venture capital firms — always hunting for hot entrepreneurs and new technology — have poured $83 billion in the past decade into start-ups in the USA, India, China and other countries, reports the National Venture Capital Association and Thomson Financial.

More than half of U.S. and foreign venture capitalists surveyed in 2006 by Deloitte & Touche and the NVCA said that they plan to expand their global investments, "a sea change in the venture industry," the report found.

Another factor: Just like corporate giants, small firms today can readily sell their goods and services worldwide because of new technology, quicker and cheaper manufacturing, and stronger shipping and banking networks. The Institute for the Future calls it a "plug-and-play infrastructure."

"The infrastructure is building up to support global trade, and the costs have fallen dramatically," says Steve King, a senior adviser at the Institute for the Future. "Suddenly, you can export more easily than ever before."

Trade issues

Government agencies and trade groups see U.S. small businesses as potent forces for trade and economic growth. Aiming to boost small-business exports, the SBA, the Commerce Department, the Export-Import Bank and the U.S. Chamber of Commerce's TradeRoots program offer financing, conferences and other resources.

The SBA's Preston says free-trade agreements create a fairer playing field for small businesses, which lack the firepower of large firms to break into foreign markets.

"Tariffs come down dramatically, rules become simpler, and (intellectual property) protections become greater," Preston says. "That opens the door for small businesses."

Pro-trade forces are lobbying Congress to pass free-trade agreements with Colombia, South Korea and Panama. Last year, those countries generated $16 billion in exports for U.S. small businesses, and those exports will grow if trade barriers fall, says SBA spokeswoman Christine Mangi.

Of course, U.S. small business owners and analysts say, going global isn't as easy as setting up shop in the local neighborhood.

Language and cultural roadblocks can lead to a maze of problems. Hefty foreign taxes and customs duties can erase profits. Weak legal systems, corruption and shady business partners can sabotage sales and deals. Intellectual property theft remains a huge problem.

"There are giant challenges that can't be dismissed," King says. "A lot of companies fail or have problems, although enough are going to succeed."

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