How large and small firms can grow together

Abstract

Recent research into the trading relationship between small and large firms reveals the extent and nature of the dependence of small firms on their large customers. The consequences of dependence for the birth and growth of small firms, and hence for public policy, are described within the context of the small firm as an ‘independent’ economic unit. One such consequence is that the procurement policies and practices of large firms can act as a barrier to entry and a constraint on the growth of new small firms. Although dependence imposes costs on the small firm, collaboration between large buyers and small sellers confers substantial benefits on the latter, particularly at entry and in the early stages at growth.