Competition and Co-operation in the Small Firm Sector
This paper examines the nature of economies of scale in the small-firm sector and aims to provide new insight into the economic efficiency of small-firm industrial districts. The theoretical analysis identifies the role played by collective external economies of scale that are realized through cooperation over input activities. Using game theory, it is shown that cooperation can emerge both as a result of rational profit maximizing behavior and as a result of institutional and cultural environments that encourage cooperation and trust. The implications for industrial policy are discussed in the concluding section. Copyright 1997 by Scottish Economic Society.
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