Firm Size Structure Research Articles

Regional economic resilience: insights from five crises

ABSTRACT We examine the association between industrial structure and regional economic resilience during five different crises in Czechia, focusing on the Covid-19 pandemic and the Russo-Ukrainian war. The effects of economic diversity, sectoral structure, factor intensity of production, and firm size structure on regional resistance were tested. We found that regional patterns of resistance varied significantly from one crisis to another. There were only two major cases where a positive association with regional resistance turned into a negative from one shock to another: public services that absorbed unemployment during the Great Recession and shed labour in the austerity crisis, and capital-intensive industries that exhibited a positive statistical effect on regional resistance during the transitionary shock and the Great Recession, while their contribution to regional labour markets during the Covid-19 pandemic and the War was negative.

Enterprise Informality in India: The Blind Spots in Public Policy

AbstractAn essential characteristic of firm size distribution patterns in developing countries including India, is a bimodal distribution with a “missing middle”, which is widely accepted in development economics. We analyse data from the Annual Survey of Industries (ASI), National Sample Survey (NSS) and Economic Census to assess the firm size structure of the whole non-farm sector. The contribution of the paper is that for the first time a comprehensive database is constructed to enable analysis of the size structure of India’s non-farm enterprises. The second contribution is that we find a deep distortion in India, with even a “small”-scale sector being very small, relatively. We examine briefly the policy-related causes that make India an outlier even among Asian economies in respect of size structure of enterprises. Finally, we argue that the historically policy-induced informality of enterprises is being entrenched by the current hiatus in state policy in even recognising the true nature of the problem of micro, small & medium enterprises (MSMEs), which holds back both their growth and employment.

Industrial Structure and Economic Resilience of Non-Metropolitan Regions: An Empirical Base for the Smart Specialization Policies

In this paper, we aim to describe and explain the regional disparities in economic resilience in Slovakia in the period 1997–2017. We focus on the effects of economic structure in combination with the vertical (potential accessibility) and horizontal geographical location. Since the early 1990s, Slovak (non-)metropolitan regions exhibited deep changes in the sectoral structure of the economy that were followed by sharp unemployment increases. Due to the FDI-fueled economic growth in the last two decades, however, considerable progress in regional economic growth and reduction in unemployment was recorded. Therefore, Slovak non-metropolitan regions provide valuable lessons for the analysis of regional economic resilience in a long-term period. We ask if, and to what extent were, the prospects of regional renewal after economic crises associated with the geographical location, economic diversity, firm size and sectoral structure of the economy. We employed spatial regression models to test the effects of the potential accessibility, horizontal geographical location and industrial diversity, and sectoral (agriculture, manufacturing) and firm size structure. The dependent variable, Economic Resilience, was measured by the Regional Development Index, combining the indicators of demographic ageing, net migration, income per capita and registered unemployment rate. Potential accessibility and horizontal geographical location were the key predictors of regional economic resilience. Districts with tertiarized and diversified industrial and firm size structures scored, on average, higher in RDI than specialized districts with large firms and/or a high share of agriculture/manufacturing in total employment.

Large and influential: Firm size and governments’ corporate tax rate choice

AbstractTheory suggests that large firms are more likely to engage in lobbying behaviour and are geographically more mobile compared with smaller entities. Conditional on jurisdiction size, policy choices are thus predicted to depend on the shape of a jurisdiction's firm size distribution, with more business‐oriented policies being enacted if jurisdictions host large firms. The paper empirically tests this prediction using local business taxation in Germany as a testing ground. Exploiting rich and exogenous variation in municipalities’ firm size structures, we find evidence for an inverse relationship between the size of hosted entities and municipalities’ local business tax choices. The effect is statistically significant and quantitatively relevant, suggesting that the rising importance of large businesses may trigger shifts towards a more business‐friendly design of (tax) policies.

How do various types of non-metropolitan regions react to economic shocks?

There have been many studies focused on regional resilience and its particular determinants at regional level such as population size, industry mix, specialization/diversity, firm size structure, export orientation or institutions. Our research question is: which types of regions are more resilient: metropolitan or non-metropolitan regions, urban cores or hinterlands, peripheral, branch plant or single factory regions? These questions were examined in our case study of post-crisis (2009-2014) economic development of Czech city-regions. We propose a typology of city-regions based on particularities in economic structure, key actors and mechanisms of development. Eight main categories of Czech city-regions were distinguished: metropolitan cores, metropolitan hinterlands, medium-sized urban regions with metropolitan functions, peripheral city- regions, single factory city-regions dominated by a large domestic manufacturing firm, “ordinary” diversified industrial city-regions, lower and higher-tiered branch plant regions dominated mostly by foreign-owned manufacturing assembly plants. We conducted a quantitative analysis focused on differences among the above mentioned types of regions in the dynamics of post-crisis growth of value added and employment in agriculture, industry, construction and business services. Empirical results show that differences in resilience among particular types of regions were relatively small. Surprisingly, single-factory city-regions and higher-tiered branch plant regions exhibited the most rapid pace of recovery, while the metropolitan cores and hinterlands lagged behind significantly.

Large and Influential: Firm Size and Governments' Corporate Tax Rate Choice

Theory suggests that large firms are more likely to engage in lobbying behaviour and have better bargaining positions against their host governments than smaller entities. Conditional on jurisdiction size, public policy choices are thus predicted to depend on the shape of a jurisdiction's firm size distribution, with more business-friendly policies being enacted if economic activity is concentrated in a small number of entities. We empirically assess this prediction studying local business tax choices of German municipalities. Exploiting rich and quasi-experimental variation in localities' firm size structures, we find evidence for an inverse relationship between the concentration of economic activity and communities' business tax choices. The effect is statistically significant and quantitatively relevant, suggesting that the rising importance of large businesses may trigger shifts towards a more business-friendly design of (tax) policies.

What Drives Firm Profitability? A Comparison of the US and EU Food Processing Industry

This paper analyzes persistence and the drivers of profitability in US and EU food processing using GMM estimations. Due to different firm size structures first comparable samples of US and EU food processors are derived using Propensity Score Matching. The GMM results indicate that profit persistence in food processing is lower than in other manufacturing sectors. Firm‐specific drivers of profitability are size and financial risk. Regarding industry characteristics concentration and the growth rate significantly influence profitability. The findings provide insights for the management of US and EU food processing firms aiming to enhance their competitiveness.

Large and Influential: Firm Size and Governments’ Corporate Tax Rate Choice?

Theory suggests that large firms are more likely to engage in lobbying behaviour and have better bargaining positions against their host governments than smaller entities. Conditional on jurisdiction size, public policy choices are thus predicted to depend on the shape of a jurisdiction's firm size distribution, with more business-friendly policies being enacted if economic activity is concentrated in a small number of entities. We empirically assess this prediction studying local business tax choices of German municipalities. Exploiting rich and quasi-experimental variation in localities' firm size structures, we find evidence for an inverse relationship between the concentration of economic activity and communities' business tax choices. The effect is statistically significant and quantitatively relevant, suggesting that the rising importance of large businesses may trigger shifts towards a more business-friendly design of (tax) policies.

Schrumpfung im Ruhrgebiet – Wachstum im Saarland

Decline in the Ruhr area - growth in the Saar region. A comparison of two former coal, iron and steel regions. The Saar region and the Ruhr area - two old-industrialized regions in Western Germany - have both experienced long-term regional restructuring since the 1960s. Although, both areas share similar economic-historical backgrounds, the Ruhr area suffers significant job losses while the Saar region experiences an increase in the number of employees. The article analyses the reasons for the different developments with special regard to sector and firm size structure, qualification and wage structure as well as location related determinants.

Job Creation Process in a Transition Economy

In many European countries, SME policy is close to being a synonym for job creation. Most empirical research on the job-generation potential of small firms over the last decade has been done in the stable and favorable economic conditions of market economies. The paper investigates the role of small firms in more difficult circumstances. On an empirical data set for Slovenia, the paper tries to show that small firms have been the most important employer during the transition period, a finding that very likely can be extrapolated for other European transition economies. Over the last decade Slovenia has transformed from a labor-managed economic system to a market-oriented economy. If we compare the firm-size structure in a socialist-like economy to the firm-size structure in a mature market economy close to equilibrium, we notice a typical absence of small- and medium-sized firms, with the exception of craft shops. That was how Slovenia appeared in the early nineties. Charac-terized by the removal of administrative barriers, transition encouraged a spontaneous entrepreneurial wave through an expanding small business sector. The ensuing changes in employment distribution changed the firm-size structure.

Exploring Regional Firm-Size Structure in Canadian Housebuilding: Ontario, 1991 and 1996

This paper is concerned with the regional firm-size structure of housebuilding in Canada based on a case study of the province of Ontario. Using an innovative database of builders in Ontario and geographic information systems, measures of regional firm-size structure are developed and are modeled with data from the Canadian census. The results corroborate established models in the city systems and industrial organization literatures in that industrial concentration is negatively associated with regional population size, economic diversity, and economic performance. Small housebuilding firms abound in large, diverse and economically vibrant regions, especially large urban regions, and thereby maintain industrial deconcentration.

Small is Transient: Housebuilding Firms in Ontario, Canada 1978-98

The North American housebuilding industry has been neglected in urban and housing studies. Its firm size structure and instability have long been cause for concern, but have rarely been given more than anecdotal treatment. This paper examines the transience of housebuilders in Ontario from 1978 to 1998. Using a census of builders provided by the Ontario New Home Warranty Program, the industry's firm membership is found to be extremely transient. Most transience comes by way of new firm formation and permanent firm exits from the market, while a small cohort of builders withdraw from and re-enter the market on a regular basis. The business cycle speeds and slows these processes but flux is due primarily to the annual turnover of small builders. To reduce transience, policy makers must decide between slowing entry and perhaps raising industry concentration or allowing continued firm entry and probably transience.

An analysis of changing management roles in small Australian services exporters in response to the stages in industry development

Life cycle models have become important in explaining the changing size structure of firms based on the carrying capacity of regions or industries. In particular, the population ecology model predicts stages of growth, maturity and eventually decline in the number of firms in an industry. There has been criticism of such models because of their focus on external variables as pre‐determinants of the potential for enterprise development. This paper attempts to reconcile the external focus of the population ecology model with relevant internal management factors in enterprise development. A survey was conducted of Australian services exporters, and the results not only confirm the existence of four separate life cycle stages in the population ecology model, but also identify the external and internal variables that are strategically relevant at each of the stages. The findings provide potentially useful information in a range of contexts including the design of small business assistance as well a providing “guide posts” to entrepreneurs engaged in enterprise development.

Firm Size Structure in North American Housebuilding: Persistent Deconcentration, 1945–98

In this paper I document and analyse the evolving firm size structure of the housebuilding industry in North America since World War 2, and place it in a wider context of industrial organisation. This is done first by synthesising the literature on housebuilding, particularly secondary data, to outline the industry's firm size and market share distributions. Second, the literature is extended with new and original data on the housebuilding industry for the province of Ontario, supplied by the Ontario New Home Warranty Program. The data are a complete annual census of builders in the province from 1978 through 1998. Using standard measures of industrial concentration and firm size classifications common to the housebuilding literature, Ontario is placed in the Canadian and North American contexts, to outline how housebuilding has evolved since World War 2. The main findings are that housebuilding shows no long-term trend toward rising market concentration. Rather, the industry's structure appears to change in cycles, while the largest firms have neither the growth rates nor the longevity to produce high levels of concentration common in other industries. On the basis of these findings, I suggest how insights into the firm size structure of housebuilding may benefit from, and contribute to, our understanding of social systems of production and discuss directions for future research.

Engine of Export-Oriented Catching-Up: Small Firms

Big conglomerates dominate the Korean economic as do small firms the Taiwan economy. I characterize Korea as a relatively low-trust society with a pro-chaebol policy bias, and Taiwan as a relatively high-trust society with an anti-big-conglomerate policy bias. I content that the differences between Korea and Taiwan in size structure of firms reflect the divergent responses of entrepreneurs to different, "semi-permanent" socio-political conditions that determine the costs of market transactions among firms. It may be desirable to change the size structure of firms, but I maintain that the possibility of actual change in the size structure is rather limited. [F14, L11]

New Firms, Small Firms and Dead Firms: Spatial Patterns and Determinants in the United Kingdom

KEEBLE D. and WALKER S. (1994) New firms, small firms and dead firms: spatial patterns and determinants in the United Kingdom, Reg. Studies 28, 411–427. The paper analyses marked county-level spatial variations in new enterprise formation, growth in numbers of small businesses, and business failures in the UK 1980–90 as measured by VAT business registration and deregistration statistics. Multivariate econometric models for different periods and sectors are used to identify a range of key determinants, chosen from previous theoretical and survey research, notably previous population growth, capital availability through housing wealth, professional expertise, firm size structures, urban agglomeration advantages and diseconomies, and growing market demand. Some evidence is found for local enterprise culture, local government expenditure and enterprise agency effects, but not for unemployment-push processes. Policy implications are discussed. KEEBLE D. et WALKER S. (1994) La naissance, la petite taille et le ...

Spatial analysis of manufacturing growth in outer South-East England 1960–1967

Keeble D. E. and Hauser D. P. (1971) Spatial analysis of manufacturing growth in outer South-East England, 1960–1967, Reg. Studies 5, 229–262. The paper discusses the hypotheses tested and data used in multiple regression analyses of the interurban spatial pattern of manufacturing change in South-East England outside Greater London. This is the most rapidly-growing major industrial region of Britain. Measurements of 39 different independent variables were used to test hypotheses relating spatial variation in seven manufacturing employment and floorspace growth indices to local industrial and firm size structures, level of industrial specialization, the impact of local and metropolitan manufacturing decentralization, market accessibility, labour availability, agglomeration economies and diseconomies, communications proximity, residential space preferences, and planning constraints and policies. A later paper will discuss the results of these analyses.