Buoyed by confidence in the U.S. recovery, middle-market firms are becoming more optimistic about the global economy, but their sentiments aren’t motivating them into new international markets, according to recent surveys by the National Center for the Middle Market.
Of more than 1,000 executives polled in the center’s second-quarter benchmarking survey, 48 percent were at least somewhat confident in the global economy, more than double the 22 percent that responded positively during the same period in 2012.
The findings were released July 23 as the center brought a nationwide roadshow to Atlanta highlighting the importance of middle-market firms, which it defines as those with revenues ranging from $10 million to $1 billion.
The boost in global confidence comes in spite of continued woes in Europe, flagging growth in emerging markets and worries about a slowdown in China.
In this uncertain global environment, executives were likely feeling more upbeat about the world because their positions at home have improved, said Anil Makhija, academic director at the center, a partnership between Ohio State University‘s Fisher College of Business and GE Capital.
Asked about the future of the U.S. economy, 63 percent of executives were at least somewhat confident, while 78 percent had the same response about their local economy.
“That confidence is now showing up in looking beyond their territory,” Dr. Makhija said.
Still, they aren’t running out to buy international plane tickets just because they feel a bit better about the world situation.
In fact, most are content to stay in the United States, according to an Economist Intelligence Unit study the center sponsored in September on the globalization of middle-market firms.
That survey revealed two distinct types of middle-market firms with divergent attitudes toward the global economy: “domestics” with no sales outside North America and “internationals” with most of their sales overseas.
Domestics accounted for 55 percent of all respondents. Only 15 percent of the 346 executives surveyed overall represented domestics with plans to become active outside North America in the next three years.
“They say that they don’t feel the need to go abroad, and what holds them from going abroad is a lack of knowledge of what the international market offers,” Dr. Makhija said. Plus, nearly 80 percent of these firms have no formal process for reviewing international opportunities regularly.
This is shortsighted, Dr. Makhija said.
“The international tsunami is coming ashore, and they’re going to soon realize that the U.S. economy is not necessarily a safe place,” he said.
The number of international firms in the survey was much smaller – only 16 percent – but they were planning to double down after seeing global bets pay off.
“They point out that going abroad has actually been a good thing for them, that it has been a source of growing sales, and furthermore, they also add that it has been beneficial to them even in their domestic economy,” he said.
That’s been the story for NanoLumens, a rapidly growing company in Norcross that makes light, energy-efficient and customizable LED displays for networks, retail outlets and more.
Competing in countries where the LED industry is well-entrenched has forced the company to concentrate on the processes and services that differentiate it. That has led to better products and a leaner operation in the United States.
“By understanding what our customers want worldwide we’re able to provide a solution not only for today but also for the future,” said Karen Robinson, executive vice president in charge of business development. NanoLumens, one of three Atlanta companies visited on the roadshow, has sold displays in places like Brazil and the Middle East, but also in LED hotbeds like Japan and China.
The center’s benchmarking survey showed that companies “bullish” on global markets like NanoLumens projected 5.6 percent revenue growth compared to 4.3 percent for purely domestic firms. They also planned to hire at a faster rate.
The survey revealed other positive outcomes, including the fact that confidence surged in the construction, manufacturing and services sectors as they related to the global economy.
But domestic concerns could weigh on growth overall.
Nine out of 10 executives worried about uncertainty around the implementation of health-care reform in the United States, while others feared that the Federal Reserve‘s moves to cull its bond-purchasing program would send interest rates up, resulting a credit crunch that could adversely impact middle-market companies.
The National Center for the Middle Market aims to shed light on the role middle-market companies play in the economy. Numbering about 200,000, they lack the lobbying budgets of the multinational giants and the numerical strength of the 6 million small businesses, but they account for about one-third of U.S. economic output.
The roadshow visit to Atlanta included a stop at Triumph Motorcycles, a historic British firm with sales operations near Hartsfield-Jackson Atlanta International Airport. It also visited NanoLumens and GSC Packaging.
To read results of the second-quarter survey, click here.
For more on the roadshow, visit http://roadshow.slate.com/tag/atlanta/
For the full report on globalization of U.S. middle-market companies, click here.