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Do small firms compete with large firms?

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  • David Audretsch
  • Yvonne Prince
  • A. Thurik

Abstract

Despite the pervasive phenomenon of scale economies, the majority of firms have always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question: How are small firms able to exist? The theories of strategic niches and dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. This paper tests the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. Considerable evidence shows that the price-cost margins of small firms do not tend to follow those of large firms. This supports the theory that small firms pursue a strategy of producing in distinct product niches. Copyright International Atlantic Economic Society 1999

Suggested Citation

  • David Audretsch & Yvonne Prince & A. Thurik, 1999. "Do small firms compete with large firms?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(2), pages 201-209, June.
  • Handle: RePEc:kap:atlecj:v:27:y:1999:i:2:p:201-209
    DOI: 10.1007/BF02300239
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    Cited by:

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    2. Flora Bellone & Patrick Musso & Lionel Nesta & Michel Quere, 2010. "Market Selection Along the Firm Life Cycle," Chapters, in: Jean-Luc Gaffard & Evens Salies (ed.), Innovation, Economic Growth and the Firm, chapter 5, Edward Elgar Publishing.
    3. Werner Hölzl, 2002. "Exit, Entry and industry turbulence in Austrian Manufacturing, 1981-1994," Working Papers geewp21, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    4. Italo Colantone & Kristien Coucke & Leo Sleuwaegen, 2015. "Low-cost import competition and firm exit: evidence from the EU," Industrial and Corporate Change, Oxford University Press, vol. 24(1), pages 131-161.
    5. Sanidas, E., 2000. "On the Organisation of SMEs and Economic Growth in the USA and Japan," Economics Working Papers wp00-05, School of Economics, University of Wollongong, NSW, Australia.
    6. Flora Bellone & Patrick Musso & Michel Quéré & Lionel Nesta, 2006. "Productivity and Market Selection of French Manufacturing Firms in the Nineties," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 319-349.
    7. Odlin, Denis, 2019. "Domestic competitor influence on internationalizing SMEs as an industry evolves," Journal of World Business, Elsevier, vol. 54(2), pages 119-136.
    8. Daunfeldt, Sven-Olov & Lang, Åsa & Macuchova, Zuzana & Rudholm, Niklas, 2011. "Firm Growth in the Retail and Wholesale Trade Sectors – Evidence from Sweden," HUI Working Papers 50, HUI Research.
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    10. Rawwas, Mohammed Y.A. & Iyer, Karthik N.S., 2013. "How do small firms possibly survive? A comparison study of marketing skills and logistics infrastructure of small and large wholesalers," International Business Review, Elsevier, vol. 22(4), pages 687-698.
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    12. Ciliberto, Federico & Jäkel, Ina C., 2021. "Superstar exporters: An empirical investigation of strategic interactions in Danish export markets," Journal of International Economics, Elsevier, vol. 129(C).

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    JEL classification:

    • L0 - Industrial Organization - - General
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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