Distribution of firms by size: observations and evidence from selected countries

Abstract

It is commonly remarked that Small and Medium-Sized Enterprises (SMEs) form the backbone of many different economies around the world, but the extent to which such national trends form part of a quantifiable larger global pattern has rarely, if ever, been examined. It is not unusual to hear business leaders, elected officials, public policymakers and researchers in a given region claim that small businesses represent a surprisingly large share of the local economy. They typically argue that SMEs constitute the majority of all firms, and have done so for an extended period of time. The claim is repeated across many national jurisdictions, but each statement is only ever considered in isolation. Few attempts have been made to compare the proportionate distribution of SMEs in one nation-state with those in other jurisdictions. Large-scale trends, however, are often the aggregate sum of many local occurrences. Is it possible that what seems to be an isolated regional phenomenon is, in fact, a common pattern across much of the world? This paper examines the number of micro, small, medium and large-sized enterprises from a selection of different countries. Using definitions and data provided by the national statistical agency in each nation, it seeks to compare the relative proportion of firms by size, and to determine if there are any common patterns. It then suggests some indicative theories about SME distribution for future research to test.