When searching for economic catalysts for small business, don’t overlook life science companies

Biopharmaceutical and medical technology companies are true pillars of New Jersey’s economy and communities. With an overall economic impact of more than $83 billion (13% of New Jersey’s GDP) and more than 430,000 total life sciences-supported jobs in the state, they can be a catalyst for even greater economic growth — particularly for small business — which embraces far more entities than is usually understood by that term.

When policymakers and others talk about growing “small business,” they often refer to a stereotype that typically does not reflect the breadth of this critical cohort of New Jersey’s economy. In addition to Main Street shops, “mom-and-pop” businesses, coffeehouses and restaurants, “small business” includes professional services providers, equipment suppliers, maintenance contractors and others whose customers are other businesses rather than the general public.

The key to growing “small business” of all types is having a robust business-to-business ecosystem. A healthy B2B ecosystem starts with larger companies that need a host of supplies and services. To meet these needs, suppliers set up shop in proximity to service their customers, creating specialized supply chains for a state or region’s leading industries. This ecosystem, or symbiotic relationship, creates an industry cluster that benefits both the larger company (purchaser) that can count on a dependable supply chain, and small business (supplier) that can rely on a predictable client base.

The cluster, in turn, attracts investment in cultural, dining and retail establishments to accommodate the workers in the cluster, thus benefitting the overall regional and state economies and improving the quality of life in our communities. The downtown retail and entertainment entities are now part of the ecosystem as well, as they are reliant on the cluster for their livelihoods.

In New Jersey, this ecosystem is highly developed in our state’s life sciences industry.  New Jersey has long been known as the “medicine chest of the world” for its world-renowned constellation of biopharmaceutical and medical technology companies, and 135-year history of global leadership in medical innovation. Our state also boasts one of the most thorough and comprehensive life sciences industry supply chains that has evolved concurrently with the industry over more than a century.

From contract manufacturers to landscapers, packaging companies to data analytics, instrument manufacturers to travel agencies, and information technology consultants and other professionals to print shops, life sciences companies engage a wide variety of businesses in their supply chain.

The latest data from We Work for Health – New Jersey shows that, in 2018, research-based biopharmaceutical companies alone purchased more than $7.9 billion worth of goods and services through more than 5,500 relationships with New Jersey-based suppliers and providers.  These suppliers and providers are in every corner of New Jersey, from High Point to Cape May, and from the Atlantic to the Delaware.

This purchasing power is responsible for supporting nearly 245,000 spinoff jobs throughout the state’s economy, as well as generating more than $46 billion in indirect and induced economic output. These figures represent just the floor, as they do not include the New Jersey supply chains of the dozens and dozens of medical technology, biotechnology and generic pharmaceutical companies in the state.

According to a 2019 study by TEConomy Partners, “Every job in the biopharmaceutical industry supported a total of five jobs across the economy, resulting from the broader impacts of its supply chain and the personal spending of its workforce.”

This virtuous cycle — a proven model for more than a hundred years — is a key to the growth of small business in New Jersey. These powerful figures suggest the most feasible path to growing the small business sector — with the greatest economic impact — is to cultivate a competitive business climate that encourages existing larger companies to expand, and attracting new ones for their mutual benefit. Expanding the B2B ecosystem will create new opportunities for small business suppliers and providers, create jobs and fortify traditional Main Street businesses.

Dean Paranicas is the CEO of the Health Care Institute of New Jersey, which serves as the trade association for the leading research-based biopharmaceutical and medical technology companies in New Jersey.