Business's Bright Side

AT times it can seem as if American business is closing up shop - or a large part of it, anyway - from all the unhappy reports about such companies as International Business Machines and General Motors.

Many of the largest corporations in the United States have had to slash staffs, close plants, and sell off subsidiaries just to stay afloat in challenging times. It is reassuring, therefore, to learn that thousands of medium-sized to smaller-sized businesses - where most Americans work - continue to expand and prosper.

How do we know this? In part, thanks to Wall Street. Investors are always on the prowl for businesses that turn a profit, and for months now a number of Wall Street stock indexes have been pointing to smaller firms as the place to stash investment dollars.

Last year, for example, the two most prominent stock measurements that follow big companies turned in lackluster gains. The Dow Jones industrial average, which monitors 30 large blue-chip stocks - such as IBM, Sears, and General Motors - grew by only 4.2 percent for 1992. The Standard & Poor's 500 grew by only 4.5 percent. But the Nasdaq Composite Index, which monitors over-the-counter stocks, shot up by a hefty 15.5 percent. The Nasdaq index includes many smaller firms, as well as high-tech and computer

companies.

Another way of viewing the buoyancy of smaller firms is to measure the amount of investment dollars going into new stock offerings - what Wall Street calls initial public offerings (IPOs). It turns out that 1992 was a banner year for IPOs, with $39 billion in capital being raised by some 600 new public companies.

When it comes to Wall Street, one year's successes may have little relevance the next year. Smaller-to-medium-sized businesses also face difficult regulatory and financial challenges, including slow US economic growth. And there is evidence that the infatuation with new stock offerings is tapering off.

Still, many financial professionals expect smaller companies to do well under Bill Clinton, given the new administration's desire to initiate tax incentives for job training, implement other measures to stimulate the private sector, and its plans to rebuild the infrastructure.

An infrastructure program would presumably aid construction firms, cement companies, and supply houses - many of them smaller-sized firms.

The bottom line: Given all the attention directed toward ailing giant corporations, one could easily overlook the fundamental strengths of American business, which is made up mainly of smaller and medium-sized enterprises.