Cultural niche dimensionality and small firm subsistence
In populations of human organizations (e.g. firms) that operate in cultural niches (markets), size differences are usually large. As large organizations can in principle out-compete small ones, the actual presence of many small organizations asks for an explanation. In ours, we focus on the dimensionality of cultural niches, that can change as a consequence of product innovations, preference elaboration, or institutions. We show that increasing market dimensionality substantially enlarges the market periphery relative to the market center, which creates new potential niches for small firms. Decreasing dimensionality, in contrast, preserves market positions for a portion of the incumbent small firms rather than forcing all of them to exit. We thereby provide a parsimonious explanation for small firm existence when dimensionality changes, even in concentrated markets and net of other factors.
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Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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- Irmen, Andreas & Thisse, Jacques-Francois, 1998.
"Competition in Multi-characteristics Spaces: Hotelling Was Almost Right,"
Journal of Economic Theory,
Elsevier, vol. 78(1), pages 76-102, January.
- Andreas IRMEN & Jean-François THISSE, 1996. "Competition in Multi-Characteristics Spaces: Hotelling Was Almost Right," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9613, Université de Lausanne, Faculté des HEC, DEEP.
- IRMEN, Andreas & THISSE, Jacques-Francois, 1997. "Competition in multi-characteristics spaces: hotelling was almost right," CORE Discussion Papers 1997053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Irmen, Andreas & Thisse, Jacques-François, 1996. "Competition in Multi-characteristics Spaces: Hotelling was Almost Right," CEPR Discussion Papers 1446, C.E.P.R. Discussion Papers.
- Irmen, A. & Thisse, J.-F., . "Competition in multi-characteristics spaces: Hotelling was almost right," CORE Discussion Papers RP 1305, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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