The Re-Emergence of Small-Scale Production: An International Comparison
Posted: 17 Nov 2009
Date Written: 1991
Abstract
Prior to the early 1970s, small and medium-sized enterprises (SMEs) were a marginal topic in economics and the social sciences. However, during the 1970s in many advanced industrialized countries, this trend began to shift as the number of SMEs and their share in area employment increased. The important developments in the size distribution of production in large and small companies are documented and various explanations for these changes are considered, as well as the potential of this shift to negatively affect society. Empirical evidence gathered from various countries is used to determine that the employment gains in the SME sector are not the result of sectoral change and also not primarily an effect of the business cycle. Instead, they are a function of two kinds of industrial restructuring: decentralization and vertical disintegration of large companies and the formation of small new venture communities. When considering the future development of SMEs, it should be known that the size of the firm is not a vital determinant of business performance. While large firms may have advantages over small firms--through a more powerful market position, positive economics of scale or scope, or better R&D services--small businesses can overcome their disadvantages and gain efficiency through a communal organization of their production and ancillary resources. (SFL)
Keywords: Human capital, Public policies, Networks, Firm growth, Wages, Working conditions, Manufacturing industries, Job creation, Firm size, Employment distribution, Decentralization, Employment growth, Interfirm alliances, Organizational structures, Economic transitions, Labor relations
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