Firm performance and size: Explanations from the small firm sectors

Conclusion This paper has presented the case that small firms deserve greater attention from economists who, in the past, have been interested primarily in larger firms.It is argued that it is unjustifiable to regard the small firm as simply a scaled-down version of a large firm. Instead, in several important areas of economics the small firm behaves in a way which is the opposite to that proposed by conventional theory, calibrated upon the large firm sector. For example it is shown that Gibrat's Law does not apply to the small firm sector. It is also argued that entry by new firms does not necessarily take place when profitability in that industry increases.Given that the small firm sector is becoming of increasing importance in the creation of wealth and employment in most developed countries the paper begins to sketch out the factors which influence the motivations and aspirations of the owners of these businesses and explores their implications for conventional economics.In particular it discusses the role of multiple ownership of small businesses by entrepreneurs. It argues that this little researched topic requires more investigation by theorists to investigate the factors influencing entrepreneurs decisions on the appropriate portfolio of businesses to be owned.This paper has benefitted from the many helpful comments received from Zoltan Acs, Hans-Jurgen Ewers and others attending the symposium. The views expressed, however, are those of the author alone.