What Makes Your Business A Winner: Empirical Analysis Using the Department of Defense Contracts with Small Manufacturing Firms

Abstract

Strengthening small businesses in any economy remains a key pillar of economic growth, technological breakthrough, and national security. The Federal Government has always sought to support its large base of small businesses through its various socio-economic policies and targeted initiatives to increase opportunities of small businesses. However the latter still face numerous challenges when it comes to securing government contracts and building manufacturing capabilities. Focusing on small manufacturing firms contracting with the Department of Defense(DoD), this study sought to empirically evaluate the effects of certain attributes on the probability of winning contracts. My findings suggest that manufacturing small enterprises are mainly found in manufacturing hubs, belong to an R&D ecosystem, meet certain quality standards, and are domestically focused. The latter finding may be of concern for the DoD as the literature has shown that export-focused firms tend to be more competitive and innovative than non-exporting firms. As the U.S. aims to regain its place as a manufacturing power, its small business strategy may need a closer look to ensure that they attract and retain small innovative firms as key parts of their supply chain.