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The Myth of Small Firms as the Predominant Job Generators

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  • Bennett Harrison

    (Carnegie Mellon University)

Abstract

The idea that small firms create the great majority of jobs in all industrialized economies has become part of the conventional wisdom, repeated by politicians, journalists, business lobbyists, and economic development planners. New or more complete data on the United States, Germany, and Japan, and other information on the OECD countries taken together, shows that this popular characterization is, at best, misleading, and in many respects, incorrect. Industrialized economies may proliferate large numbers of small companies and establishments, but the largest business organizations continue to account for the great majority of jobs, to pay the highest wages and benefits, and to dominate the coordination of production among networks of firms, the control of finance, and the adoption and implementation of new technology. The implication for policy is not that public support for small firms should be abandoned, but rather that a more balanced approach to economic development is needed, one which properly accounts for the continuing central role of the big firms and their strategic partners—even in what some have called this "age of flexibility. "

Suggested Citation

  • Bennett Harrison, 1994. "The Myth of Small Firms as the Predominant Job Generators," Economic Development Quarterly, , vol. 8(1), pages 3-18, February.
    • Handle: RePEc:sae:ecdequ:v:8:y:1994:i:1:p:3-18
    DOI: 10.1177/089124249400800101
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    Cited by:

    1. David L. Barkley, 1996. "Turmoil in traditional industry: prospects for nonmetropolitan manufacturing," Monograph, Federal Reserve Bank of Kansas City, number 1996titpfn.
    2. Karen Chapple, 2014. "The Highest and Best Use? Urban Industrial Land and Job Creation," Economic Development Quarterly, , vol. 28(4), pages 300-313, November.
    3. Gebremariam, Gebremeskel H. & Gebremedhin, Tesfa G. & Jackson, Randall W., 2004. "The Role Of Small Business In Economic Growth And Poverty Alleviation In West Virginia: An Empirical Analysis," 2004 Annual meeting, August 1-4, Denver, CO 20290, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Love, Lisa L. & Crompton, John L., 1999. "The Role of Quality of Life in Business (Re)Location Decisions," Journal of Business Research, Elsevier, vol. 44(3), pages 211-222, March.
    5. Ed Bee, 2003. "Knowledge Networks and Technical Invention in America's Metropolitan Areas: A Paradigm for High-Technology Economic Development," Economic Development Quarterly, , vol. 17(2), pages 115-131, May.
    6. Felsenstein, Daniel & Fleischer, Aliza, 1999. "Capital Assistance and Small Firm Growth: Implications for Regional Economic Welfare," ERSA conference papers ersa99pa395, European Regional Science Association.
    7. Andrew M. Isserman, 1993. "State Economic Development Policy and Practice in the United States: A Survey Article," International Regional Science Review, , vol. 16(1-2), pages 49-100, April.
    8. Sherri Leronda Wallace, 1999. "A Case Study of the Enterprise Zone Program: “EZ†Avenue to Minority Economic Development?," Economic Development Quarterly, , vol. 13(3), pages 259-265, August.

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