Every so often a report comes across our desk that makes us go "wow!". McKinsey's Digital Globalization: The new era of global flows is such a report.
It claims that "soaring flows of data and information now generate more economic value than the global goods trade."
That's a pretty stunning statement, but not the one that got us to go "wow".
What got us to go "wow" is their view of the growing role small businesses are playing global trade. Key "wow" producing quote:
... the share of exports by large multinational corporations dropped from 84 percent in 1977 to 50 percent in 2013. Companies with fewer than 500 employees accounted for 97.8 percent of all identified US exporters and 97.2 percent of all identified US importers in 2011. The number of US exporting entities with fewer than 50 employees, in particular, has grown more rapidly than firms with 50 to 500 employees.
The reason for this explosive growth in small business globalization is, of course, the Internet. Key quote:
Small businesses worldwide are becoming “micro-multinationals” by using digital platforms such as eBay, Amazon, Facebook, and Alibaba to connect with customers and suppliers in other countries.
The other side of this is global customers are increasingly buying things from companies not located in their home countries.
The study chart below (click to enlarge) illustrates McKinsey's aggressive forecast for cross border B2C commerce.
It's not just small employer businesses that are expanding internationally. The report stresses that individuals and the self-employed are becoming increasingly globalized.
This is echoed in data from the MBO partners State of Independence studies. These show over 2 million U.S. independent workers are exporters of services or goods.
While we were wowed by the extent of the growth of small business globalization presented in this report, we weren't really surprised.
Back in 2008 we forecast that by 2018 almost half of U.S. small businesses would be involved in global trade. The reason we believed this at that time is similar to McKinsey's explanation - the Internet was making trade so much easier.
Shortly after we released that forecast the world fell into the Great Recession, so it didn't look too promising. Now, if anything, it looks like that forecast was low.
For those who don't want to wade through McKinsey's 128 page report or even their 28 page summary, these two articles provide a good overview:
What Happens When Global Trade Goes Virtual - from Bloomberg View
These Charts Show How Globalization Has Gone Digital - Huffington Post
Comments