Rural policy makers and officials have become increasingly dissatisfied with recruitment strategies that target only branch plants of large companies. The probability of attracting a new branch plant has declined while the costs of recruitment have increased dramatically. A popular alternative to branch plant recruitment is the development of homegrown small and midsize enterprises (SMEs). The most frequent argument for targeting small and midsize employers is that SMEs create most new jobs and contribute to employment stability, particularly during cyclical downturns. SMEs in residential services industries and industries dependent on natural resources and low-wage labor were more attracted to nonmetropolitan than metropolitan locations. Rural areas face sizeable disadvantages in trying to generate economic development through SMEs. The costs of doing business with other small enterprises downstream and upstream may be too high for small specialty enterprises in nonmetropolitan areas, particularly outside urban commuting zones.