Firm size and productivity in Spain: a stochastic frontier analysis

This paper analyses the performance of the small and medium-sized manufacturing firms during the period 1995–2001, focusing on the degree of technical inefficiency and its determinants. We use a micro panel data set to simultaneously estimate a stochastic frontier production function and the inefficiency determinants using an unbalanced panel of manufacturing firms. Our empirical results suggest that small and medium-sized firms tend to be less inefficient than the large firms are. Also, we centre our analysis in the effect on efficiency of some organisational factors related to the managerial ability to use and adjust capital and labour properly.

Firm size and innovation

In an innovation survey in the Netherlands, we find considerably more SMEs which perform small scale R&D than are found in the official R&D surveys. Nonetheless, SMEs appear on average to be somewhat less R&D intensive than large firms. Only when we restrict our observations to firms which perform some R&D, there is no systematic relationship between size and R&D. Among the barriers to innovation the following are particularly important to SMEs: information deficits with respect to instruments of innovation policy; a lack of capital; a lack of management qualifications; problems in finding adequate technical information, and problems in finding qualified employees.     

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.     

Firm productivity and export markets: a non-parametric approach

This paper examines total factor productivity differences between exporting and non-exporting firms. These differences are documented on the basis of a sample of Spanish manufacturing firms over the period 1991-1996. The paper also examines two complementary explanations for the greater productivity of exporting firms: (1) the market selection hypothesis, and (2) the learning hypothesis. Non-parametric tests are proposed and implemented for testing these hypotheses. Results indicate clearly higher levels of productivity for exporting firms than for non-exporting firms. With respect to the relative merits of the selection and the learning hypotheses, we find evidence supporting the self-selection of more productive firms in the export market. The evidence in favor of learning-by-exporting is rather weak, and limited to younger exporters.     

Firm size and job creation in Germany

This paper reports new results on the role of firms from various size classes in the job generation process in Germany. It is based on a unique longitudinal data set covering all manufacturing establishments that existed in at least one year between 1978 and 1993 in the German federal state Lower Saxony. We find that gross job creation and destruction rates tend to decline with firm size, while net job creation rates and firm size are not systematically related when firms are classified according to their average number of employees in the base and end year. Small firms create (destroy) quite a large share of all new (lost) jobs.     

Firm heterogeneity and FDI-related productivity spillovers: A theoretical investigation

A number of existing empirical studies have attempted to estimate the foreign direct investment (FDI)-related productivity spillover effects to domestic firms in host economies using various methodologies and measures of FDI. This literature has produced mixed results. While some studies found positive spillovers, others reported zero or even negative spillovers. In this paper, using a model of firm heterogeneity, we provide a rigorous theoretical justification for the mixed findings. We show that FDI-related productivity spillover effects can be decomposed into a direct and an indirect effect. If the direct effect is positive then relatively less capable domestic firms that were not able to survive in the industry (before the arrival of foreign firms) can enter the industry, which decreases the average (expected) productivity of the industry. If this indirect effect is sufficiently strong then the overall impact of FDI on productivity of domestic firms can be zero or negative. Hence, irrespective of the type of FDI (vertical or horizontal) and control variables included in empirical models, one may find negative or zero spillover effects.     

Firm size effects on transaction costs

Associated with effects of scale, scope, experience and learning there are effects of firm size on transaction costs; in the stages of contact, contract and control. These effects are due to threshold costs in setting up contacts, contracts and governance schemes, and to differences with respect to the factors that cause transaction costs: bounded rationality, opportunism, uncertainty and transaction specificity of assets. Implications are considered for firm strategy and public policy.     

Firm size and the adoption of flexible automation

Data on the diffusion of flexible automation systems in the Italian metalworking industry are used to point out the role of size for the adoption of complex, systemic innovations. Plant and firm sizes turn out to be positively correlated to adoption rates. Moreover, adoption is more likely, ceteris paribus, in plants which are part of large industrial groups. This pattern applies in general, and is particularly remarkable for more advanced solutions. In this light, guidelines for industrial policies that focus on financial support, the diffusion of industrial standards, and the correction of asymmetries in the availability of know-how and skills are proposed.Financial support for this paper was provided by the Ministero della Pubblica Istruzione (MPI 40% research funds). Grants from the Fondazione Mauro and the CNR research project Tecnologie Meccaniche are also acknowledged. The research took advantage of the FLAUTO database, set up at the Laboratorio di Economia dei Processi di Automazione, MIP-Politecnico di Milano.     

Firm ownership and productivity: a study of family and non-family SMEs

Motivated by a lack of consensus in the current literature, the objective of this paper is to reveal whether family firms are more or less productive than non-family firms. As a first step, this paper links family business research to the theoretical notion that family involvement has an effect on the factors of production from a productivity standpoint. Second, by using a Cobb–Douglas framework, we provide empirical evidence that family labour and capital indeed yield diverse output contributions compared with their non-family counterparts. In particular, family labour output contributions are significantly higher, and family capital output contributions significantly lower. Interestingly, differences in total factor productivity between family and non-family firms disappear when we allow for heterogeneous output contributions of family production inputs. These findings imply that the assumption of homogeneous labour and capital between family and non-family firms is inappropriate when estimating the production function.     

Firm size and employment determination in dutch manufacturing industries

This paper examines whether the determination of employment differs between large and small firms. An employment equation is estimated on panel data of 67 (35) three-digit industries in Dutch manufacturing (1974–1986). The conclusions are as follows. Firstly, employment adjustment appears to be faster in small firms than in large ones. Secondly, the elasticity of factor substitution and the real wage elasticity at constant output are nearly the same for large and small firms. Thirdly, the estimated output elasticities suggest constant returns to scale in large firms and increasing returns in small ones. Finally, the number of working hours has less impact on employment in small firms than in large ones.     

Firm size,profitability, and savings in Canada

This paper explores the relationship between firm size, profitability, and corporate savings behavior in Canada. It shows that the long-run propensities to save out of profits are much the same for firms of all sizes, although foreign-owned firms generally retain more of their profits compared to domestic firms. Profitability has also been found to be largely independent of variations in firm size, although large foreign-owned firms generally earn higher profits than large domestic firms. The study also finds no evidence for the superiority of the “dividend effect” over the “retained effect”. It is suggested that the relatively high debt ratio experienced by small domestic firms might be better explained by the demand than the supply side of the markets for new equity.     

Firm size and efficiency in the German mechanical engineering industry

Research usually finds a positive size-efficiency relationship, but few studies focus on sectors dominated by small and medium-sized firms (SMEs). This paper fills this gap by analyzing this relationship in the German mechanical engineering industry sector, which is both successful and increasingly dominated by SMEs. The analysis, using a large and representative dataset, finds that small and large firms are, on average, the most efficient ones, while medium-sized firms have, on average, the greatest inefficiencies. Thus, the size-efficiency relationship is U-shaped rather than monotonically increasing. Additionally, the analysis finds that companies with active owner(s) are significantly more efficient and that capital firms are less efficient than firms with personally liable owners. Being located in either East or West Germany has no effect.     

Firm size,efficiency and employment: A review article

Summary S-J's book contains much careful and interesting discussion of small-firm employment data and related issues, and will be read by all workers in the field. However it also contains too much detailed quantification and international comparison of doubtful relevance, at least for most economists, and misses much background material of direct importance for evaluating the role of small firms. As a result, the authors seriously under-estimate the contribution of small business to both employment and efficiency of modern economies, as well as the importance of policy to correct the traditional and still pervasive bias towards large organizations.     

High tech manufacturing: Firm size,industry and population density

Location theorists have emphasized the importance of agglomeration economies in explaining the concentration of industrial activity. They have divided these economies into portions that relate to average industry size, firm size, and market size. This study examines these three factors, in the context of value created, and concludes that each is statistically different for high tech industries in comparison to non-high tech industries. This finding adds an important dimension to state industrial development strategies, particularly those focused on high tech.     

Can fat taxes and package size restrictions stimulate healthy food choices?

Consumers prefer bonus packs, as opposed to price discounts, for healthy foods, but they want a price discount rather than a bonus pack for indulgent foods (Mishra & Mishra, 2011). This study conceptually replicates and extends this finding to show that consumers are more responsive to changes in price than to changes in package size for indulgent food options, whereas they are more responsive to changes in package size than to changes in price for healthy food options.     

Firm size,university based research,and the returns to R&D

This paper compares university-based research relationships between small and large firms as an explanation for the difference in innovative activity across firm sizes. We test the hypothesis that there are diseconomies of scale in producing innovations in large firms due to the inherent bureaucratization process which inhibits both innovative activity as well as the speed with which new inventions move through the corporate system towards the market. By utilizing university-based research relationships, small firms are able to avoid bureaucratic inefficiencies.