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A Technological and Organisational Explanation for the Size Distribution of Firms

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  • Gans, Joshua S
  • Quiggin, John

Abstract

This paper combines insights from the literature on the economics of organisation with traditional models of market structure to construct a theory of equilibrium firm size heterogeneity under the assumption of a homogenous product industry. It is possible that configurations consisting entirely of small firms (run by entrepreneurs with limited attention) and with larger firms (using managerial techniques to substitute away these limits to allow increasing returns technologies to become profitable) can arise in equilibrium. However, there also exist equilibrium configurations with the co-existence of large and small firms. The efficiency properties of these respective equilibria are discussed. Finally, the implications of an expanding market size are considered. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Gans, Joshua S & Quiggin, John, 2003. "A Technological and Organisational Explanation for the Size Distribution of Firms," Small Business Economics, Springer, vol. 21(3), pages 243-256, November.
    • Handle: RePEc:kap:sbusec:v:21:y:2003:i:3:p:243-56
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    Cited by:

    1. Soumyananda Dinda & Arijit Mukherjee, 2014. "A Note on the Adverse Effect of Competition on Consumers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 157-163, February.
    2. Wang, Leonard F.S. & Mukherjee, Arijit, 2012. "Undesirable competition," Economics Letters, Elsevier, vol. 114(2), pages 175-177.
    3. Harvie, Charles & Lee, Boon-Chye, 2003. "Public Policy and Small and Medium Enterprise Development," Economics Working Papers wp03-18, School of Economics, University of Wollongong, NSW, Australia.
    4. Martin C. Byford & Joshua S. Gans, 2014. "Permission to Exist," NBER Working Papers 20512, National Bureau of Economic Research, Inc.
    5. Murat ATAN & Emre BOZDAĞ, 2011. "Avrupa Karbonatlı İçecekler Piyasasında Firma Büyüklüğü Ve Büyüklük Genişleme Oranı İlişkisi," Ekonomik Yaklasim, Ekonomik Yaklasim Association, vol. 22(80), pages 19-38.
    6. Andrikopoulos, A. & Dassiou, X., 2018. "Exchange-rate exposure in a “Rule of Three” Model," Working Papers 18/02, Department of Economics, City University London.

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