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‘Double Trouble’: the Growth of Small and Medium-Sized Enterprises in Small States

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Author Info
Adreene Staines
Abstract

In small economies, domestic market size constraints are expected to influence the economic growth process. This paper hypothesises that they will also influence the size and growth of firms in these economies. The paper accomplishes two main objectives. Firstly, it examines the nature of the firm size-firm growth relationship in Jamaica. It tests Gibrat’s Law - that there is no observed relationship between firm size and firm growth - using firm evidence for Jamaica, a small developing economy. Secondly, the paper investigates and identifies the major determinants of firm growth in Jamaica. The special characteristics of small economies - limited market size, prevalence of small firms and high propensity to export - suggest that the firm growth process may be influenced by factors other than firm size. The main findings from quantitative analyses of firm level data, gathered through firm questionnaires, are that sectoral classification is the main determinant of firm growth in the case of Jamaica. Financial services firms are found to grow faster than firms in the manufacturing, retail and distribution sectors. Further, small firms in Jamaica grow faster than their larger counterparts, hence a negative relationship is observed between firm size and firm growth.

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Paper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 003061.

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Date of creation: 2005
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Handle: RePEc:lan:wpaper:003061

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  1. Sleuwaegen, Leo & Goedhuys, Micheline, 2002. "Growth of firms in developing countries, evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 68(1), pages 117-135, June. [Downloadable!] (restricted)
  2. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August. [Downloadable!] (restricted)
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  3. Brito, Paulo & Mello, Antonio S., 1995. "Financial constraints and firm post-entry performance," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 543-565, December. [Downloadable!] (restricted)
  4. McPherson, Michael A., 1996. "Growth of micro and small enterprises in southern Africa," Journal of Development Economics, Elsevier, vol. 48(2), pages 253-277, March. [Downloadable!] (restricted)
  5. Shanmugam, K R & Bhaduri, Saumitra N, 2002. "Size, Age and Firm Growth in the Indian Manufacturing Sector," Applied Economics Letters, Taylor and Francis Journals, vol. 9(9), pages 607-13, July. [Downloadable!] (restricted)
  6. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  7. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September. [Downloadable!] (restricted)
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  8. Briguglio, Lino, 1995. "Small island developing states and their economic vulnerabilities," World Development, Elsevier, vol. 23(9), pages 1615-1632, September. [Downloadable!] (restricted)
  9. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 567-81, June. [Downloadable!] (restricted)
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  10. Singh, Ajit & Whittington, Geoffrey, 1975. "The Size and Growth of Firms," Review of Economic Studies, Blackwell Publishing, vol. 42(1), pages 15-26, January. [Downloadable!] (restricted)
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