Firm-size distribution and price-cost margins in Dutch manufacturing

Industrial economists surmise a relation between the size distribution of firms and performance. Usually, attention is focused on the high end of the size distribution. The widely used four-firm seller concentration ratio, C4, ignores what happens at the low end of the size distribution. We investigate to what extent the level and the growth of small business presence influence price-cost margins in Dutch manufacturing. We use a large data set of 66 industries for a thirteen year period. This allows the investigation of both small business influences within a framework in which that of many other market structure variables is also studied. Evidence is shown that price-cost margins are influenced by large firm dominance, growth in small business presence, capital intensity, business cycle, international trade and buyer concentration.