Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 1998-02-09
Number: 98-013/3
Author-Name: D.B. Audretsch
Author-Email: prcdba@langate.gsu.edu
Author-Workplace-Name: Georgia State University, CEPR
Author-Name: Y.M. Prince
Author-Workplace-Name: EIM Small Business Research and Consultancy
Author-Name: A.R. Thurik
Author-Email: thurik@few.eur.nl
Author-Workplace-Name: Erasmus University and EIM Small Business Research and Consultancy
Title: Do Small Firms compete with Large Firms?
Abstract: Despite the pervasive phenomenon of scale economies the majority of firms hasalways been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question of how small firms are able to exist. The theories of strategic niches and  dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. Inthis paper we test the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. We find considerable evidence that the price-cost margins of small firms do not tend to follow those of large firms. This is interpreted as supporting the theories that small firms pursue a strategy of producing in distinct productniches.
Classification-JEL: L0,L6
File-Url: https://papers.tinbergen.nl/98013.pdf
File-Format: application/pdf
File-Size: 48793 bytes
Handle: RePEc:tin:wpaper:19980013