This is a commentary piece written by Catherine Renault. She is the former director of Maine’s Office of Innovation, which no longer exists, and currently runs her own consulting business, Innovation Policyworks, in Brunswick.

For years, it’s been a pet peeve of mine that many policymakers and legislators in Maine and elsewhere focus on supporting small businesses and startups equally when the data are quite clear: It is technology-based startups that provide the major contributions to job creation, innovation, exports, and productivity growth. In general, non-tech companies are often not focused on growth, have lower wages, and are in “local-serving” industries, creating no net new jobs.

So, while it’s politically correct to talk about supporting small business, and reflects the federal focus through the Small Business Administration and programs like the Small Business Development Centers and small business set-asides, it’s not actually the most effective strategy for growing a local economy.

The national data also show that while new-business formation is down overall, technology-based start-up rates have been increasing. In the past ten years, technology-based startups have increased 47% and employment has increased 20%, according to data from the Information Technology and & Innovation Foundation (link is a PDF). Technology-based startups pay more than twice the national average wage, and three times the average start-up wage.

In Maine, for instance, the U.S. Census Bureau’s Survey of Entrepreneurs for 2015 found that 76.7% of Maine firms had less than 10 employees, including no employees at all except the owner. Only 3.3% of Maine firms have more than 500 employees, the U.S. government threshold for what it considers large businesses. Another data source, Youreconomy.org, suggests that between 2015-16, the total number of businesses in Maine grew from 106,100 to 108,500. While the number of non-employer businesses stayed the same as a percent, as did the percent of businesses with fewer than five employees less than 5 employee businesses, the number of businesses with 10-99 employees went up, perhaps indicating that companies were growing past the 10-person threshold.

Those large businesses with more than 500 employees? In Maine, they are predominately utilities, information, finance and insurance. Most of the tiny businesses are in agriculture, construction, real estate and health care, many of them local-serving firms. And the sectors experiencing growth: information, finance and insurance, agriculture (probably all those micro-breweries!) and professional, technical and scientific services-all science- and tech-related.

Many small firms stay small, and that’s what their founders intend. They have no desire to grow; they just want to work for themselves and make a comfortable living, and that’s completely understandable. A vibrant community needs lots of those businesses, as well. But when the goal of investing public dollars (either through SBA loans or state-level small business set-asides) is to get the best “bang for the buck,” then it makes sense to invest those public dollars in the companies with the largest growth potential.

And while conventional wisdom is that small businesses are the major job creators within an economy, that’s actually not true, according to Robert D. Atkinson and J. John Wu, who authored the 2017 State New Economy Index, published in November 2017, for the Information Technology & Innovation Foundation, that addresses this oft-misunderstood talking point.

“The ‘small is beautiful’ advocates would advise economic development officials that states and regions with more small firms are economically healthier than those with large ones. Small firms, according to this narrative, are the font of innovation and job creation, and they have a greater multiplier effect on regional economies. For these advocates, including small business lobbying groups, states that have higher rates of new business formation are more ‘entrepreneurial’ and therefore better positioned economically,” they write. “This view has become widely accepted in policymaking circles, particularly in the last decade. But it turns out this conventional wisdom is wrong. … On virtually every economic indicator, including wages, innovation, exports, and even job creation, large firms in the United States outperform small ones. Moreover, states with larger average firm sizes outperform states with smaller firms.”

With that in mind, Atkinson and Wu conclude that policymakers should abandon economic development strategies that include supporting small business based purely on their size.

“To the extent state economic development policies give some kind of preference to small firms, they should do so because they are either in export-based industries (e.g., small manufacturers) or because they have the potential to become high-growth “gazelles” (e.g., high-tech spin offs from a state university),” they write. “But states should eliminate policies designed to help run-of-the-mill small ‘entrepreneurs.'”

The aspects of a company’s DNA that should matter when Maine’s policymakers are determining what companies should receive support are intent and execution-not their size. Does a new business want to grow? Does it bring outside money into an economy, rather than just from local clients? Does the business have a demonstrable and meaningfully unique advantage that will add value, increase productivity or solve a critical societal problem? These are the businesses to invest in and accelerate, regardless of their age or size.

While these trends are difficult to swallow for small communities with few of these companies, they only serve to underline the importance of policies that support spreading education in STEM fields more broadly, increasing access to the Internet, pushing local universities to engage in research and technology transfer, and to broadening the geographic scope of technology-based economic development.

Maine needs to rethink its strategy, which currently allocates more funding to small businesses than to growth businesses and focuses on protecting long-standing, but declining industries rather than supporting new opportunities for growth.