Performance, Firm Size and the Heterogeneity of Competetive Strategy for Long-lived Small Firms: A Simultaneous Equations Approach
AbstractThis paper examines the relationship between firm size, competitive strategy and performance, for the long-lived small firm in Scotland. It uses structural modelling to test the hypothesis that small firms need to remain small if they are to be long-lived. In a three-equation simultaneous model, performance, size and the dimensions of the competitive strategy of the firm are jointly determined. Econometric estimates of the three equations are reported, using 2SLS and iterated 3SLS. A trade-off is found to exist between firm size and performance. Further, we find that to attain higher equilibrium values of performance, a varied competitive strategy needs to be adopted. Our prescription is that small firms need to adjust downwards in size, and to cultivate a more varied competitive strategy, if there the entrepreneurs are to have a positive influence on performance, thus promoting longevity of their firms.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0307.
Date of creation: Feb 2003
Date of revision:
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Performance; Small Firms; Size; Competitive Strategy; Simultaneity;
Find related papers by JEL classification:
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-ENT-2005-06-14 (Entrepreneurship)
- NEP-FIN-2005-06-14 (Finance)
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