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Institutional Effects on the Evolution of the Size Distribution of Firms

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  • Henrekson, Magnus

    ()
    (The Research Institute of Industrial Economics)

  • Johansson, Dan

    (Royal Institute of Technology (KTH), Industrial Economics and Management/KTH-Indek)

Abstract

In this paper it is argued that the size distribution of firms may largely be determined by institutional factors. This hypothesis is tested in an exploratory fashion by studying the evolution of the size distribution of firms over time in Sweden for a period spanning from the late 1960s to the early 1990s. The data used is divided into finer size classes compared to most previous studies. This gives more scope for investigating the impact of institutions. Moreover, we use a unique data set, starting in 1984, to take account of corporate groups and government ownership. The analysis shows a poor development for intermediate-sized (10-199 employees) firms. This is likely to reflect the existence of a threshold that many firms are either unwilling or unable to cross. The analysis of the institutions and rules of the game determining the entrepreneurial and business conditions in Sweden indicate that the conditions have been unfavorable for small firms, and hence that too few small firms have managed to grow out of the smallest size classes. The conclusion is supported by an international comparison of the number of firms in different size classes. Data indicate that Sweden has fewer small (10-99) employees), and more large (500+) firms per capita than other European countries.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 497.

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Length: 20 pages
Date of creation: 01 Mar 1998
Date of revision:
Publication status: Published in Small Business Economics, 1999, pages 13.
Handle: RePEc:hhs:iuiwop:0497

Note: Published in Small Business Economics, Vol. 12, No. 1, 1999.
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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Business taxation; Industrial policy; Industrial structure; Size distribution;

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References

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  1. Davis, Steven J. & Henrekson, Magnus, 1995. "Industrial Policy, Employer Size and Economic Performance in Sweden," Working Paper Series 436, Research Institute of Industrial Economics.
  2. Carlsson, Bo & Braunerhjelm, Pontus, 1993. "Entreprenörskap, småföretag och industriell förnyelse 1968-1991," Working Paper Series 372, Research Institute of Industrial Economics.
  3. Eliasson, Gunnar & Kazamaki Ottersten, Eugenia, 1994. "Om förlängd skolgång," Working Paper Series 412, Research Institute of Industrial Economics.
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  5. Davis, Steven J. & Henrekson, Magnus, 1997. "Explaining National Differences in the Size and Industrial Distribution of Employment," Working Paper Series 482, Research Institute of Industrial Economics.
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  7. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  8. Davidsson, Per, 1989. "Entrepreneurship -- And after? A study of growth willingness in small firms," Journal of Business Venturing, Elsevier, vol. 4(3), pages 211-226, May.
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  10. Cressy, Robert & Olofsson, Christer, 1997. " The Financial Conditions for Swedish SMEs: Survey and Research Agenda," Small Business Economics, Springer, vol. 9(2), pages 179-94, April.
  11. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-26, November.
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  13. Per-Anders Edin & Robert Topel, 1997. "Wage Policy and Restructuring: The Swedish Labor Market since 1960," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 155-202 National Bureau of Economic Research, Inc.
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  16. Nooteboom, B., 1993. "Firm size effects on transaction costs," Open Access publications from Tilburg University urn:nbn:nl:ui:12-376115, Tilburg University.
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