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Atlantic Economic Journal

, Volume 27, Issue 2, pp 201–209 | Cite as

Do small firms compete with large firms?

  • David B. Audretsch
  • Yvonne M. Prince
  • A. Roy Thurik
Articles

Abstract

Despite the pervasive phenomenon of scale economies, the majority of firms have always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question: How are small firms able to exist? The theories of strategic niches and dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. This paper tests the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. Considerable evidence shows that the price-cost margins of small firms do not tend to follow those of large firms. This supports the theory that small firms pursue a strategy of producing in distinct product niches.

Keywords

Economic Development Economic Policy International Economic Public Finance Small Firm 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© International Atlantic Economic Society 1999

Authors and Affiliations

  • David B. Audretsch
    • 1
  • Yvonne M. Prince
    • 2
  • A. Roy Thurik
    • 3
  1. 1.Indiana University at BloomingtonU.S.A.
  2. 2.EIM Small Business Research and ConsultancyU.S.A.
  3. 3.Erasmus University RotterdamThe Netherlands

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