Peripherality and the Impact of SME Takeovers
AbstractNew Economic Geography models typically predict centripetal economic development. One process by which this might be brought about is if large companies based in the core of the economy buy up and remove small dynamic enterprises from peripheral regions, thereby suppressing development outside the core. This hypothesis is investigated by analysing the very large UK administrative firm-level Business Structure Database. Contrary to the experience of big firms, more productive small businesses are more subject to takeover - although this effect is weaker if they are located in peripheral regions than in the core. Takeovers also increase the chances of a small and medium size enterprise (SME) closing, but the exit consequence is greater for the core region. Takeovers raise productivity after acquisition in all regions but by less for the most productive SMEs. Ignoring any productivity gains to acquiring firms, the positive impact in the core region during the years considered is slightly larger than in the periphery, principally because takeovers are more common in the core. As this impact is a contributor to regional divergence, policy should aim to improve the operation of the market for SMEs in the periphery.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/9.
Length: 42 pages
Date of creation: Apr 2008
Date of revision: Jul 2012
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More information through EDIRC
SMEs; takeovers; regional development; exits;
Find related papers by JEL classification:
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-05 (All new papers)
- NEP-ENT-2008-05-05 (Entrepreneurship)
- NEP-GEO-2008-05-05 (Economic Geography)
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