In developed as well as developing countries, we can find different types of industrial companies that range from very small to very large companies. The size, number and collaboration of these companies can hardly influence the industrial development of the whole country. What is best for a country to have, a small number of huge companies that earn billions or a large number of small to medium companies that interact with each other?
One argument holds that big firms pay efficiency wages, because (a long story short) their workers are more productive. This makes the price of capital to labor cheaper, creating more possibility for investment. As this goes on, old capital will be replace by newer ones that embodies new technical progress. Dependent on the rate of diffusion etc this should be good for the country.
About the number of large companies, I think concentration is the issue. More market power to them would mean more deadweight loss to society. I will go for more small companies, this way domestic industries may be able to compete, and help to keep more profits in the country, which will boost their GDP and standard of living, as oppose to showing a big GNP only to learn that 80 percent or so have gone abroad. This is a deep topic, and a welcome question to the forum.
Lall Ramrattan
Essentially, I dont think there is a universal answer to this question. Some countries have pursued the strategy of subsidizing "national champion" firms to compete in the world economy; that seems to work so long as basic market discipline is enforced in terms of investment decisions. But if investment decisions become politicized, which is a danger, then the big-firm strategy can be vulnerable. And of course big firms also depend on an infrastructure of smaller firms for supply and innovation.
In general, big companies are more productive and efficient. They can play a big role in economic development by becoming multinational corporations. However more small companies can play a big role socially.
the size of company matter with the efficiency of production. if it is cost effective then the level of company matters, otherwise it would not
From the perspective of start-up, small companies are easier to start than big companies (important for job creation). On the basis of economies of scale, big companies are ideal (important for efficiency and productivity). From these perspectives, it can be argued that both big and small companies are needed. Some countries have thrived on a big company footing while others have thrived on a small company footing. Big companies tend to be multinationals (dividends tend to go out of the country) while small companies tend to be local (dividends usually stay locally).
I would not look to size per se. rather the following would be positive facilitators of economic growth of its home territory:
a. its innovativeness. the creation of intellectual assets (patents, trade sectrets, copyrights, licences that can enable the firm to harvest revenues from the rest of the world).
b. Tied very closely to the first factor would be its talent management systems
c. its competitiveness (driven by leadership, innovation, productivity, efficiencies)
d. its global footprint or reach: including its networks
e. its quality standards:
Big firms means huge financial means and considerable assets. it necessary leads to generate abundant revenues and creating more profits.
The Italian experience has shown that the decline of big companies, either private or public, quite contributed to the slowdown of the economy, penalizing productivity and innovation. Relying too much on small-medium size firms, districts and cooperatives, that is emphasizing territories’ socioeconomic specificities, may in the long run prove to be counterproductive.
The argument that large corporations are more efficient than small businesses is based on the concept of economy of scale.
“So, why then are large corporations generally so successful? Because of their ability to manipulate the market. Large corporations are in a better position to negotiate with their vendors and suppliers for lower costs, discounts, and even rabbet (legal kick-backs). This is what gives them an advantage over smaller businesses. Further, in order to recoup the lost revenue from these various discounts, the vendors and suppliers must raise their prices for their other customers. This puts the smaller businesses at an even greater disadvantage”.
For more information, you can look at the following link:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=364x2888968
About efficient small German companies, go to BASF, BAYER, etc and you will see very efficient large companies.. maybe it is a national feature.
Big companies have large resources and capacity to develop new areas which smaller ones struggle. They also can have large economies of scale of production. For many companies there is the problem of large costs of regulatory compliance, in some sectors like pharmaceuticals, biotechnology and chemicals putting products in the markets costs literally millions, smaller ones cannot do it and are forced to sell their idea and the company to bigger ones. This brings to the idiosyncrasy of many NGOS and social groups that speak of the importance of SMEs indirectly promoting larger ones. By demanding consumer protection, labelling and more and more tests using often the precautionary principle, they seem to be increasing market entry costs and increasing the monopoly of corporations. It is an interesting and little researched phenomenon. Many anti-corporate environmental movements may be promoting involuntarily larger corporates in these branches... food for thought.
Larger companies can exploit cost advantages in all aspects of businesses by producing more. They are in a position to use new capital intensive technology at a lower average cost and so they expand businesses further. Larger firms often invest in research to find innovative method of increasing production for home market as well as for global market. Large-scale businesses can afford to invest in expensive and specialist capital machinery, which often are not cost-efficient for small companies. Larger companies split complex production processes into separate tasks and use the advantage of division of labour to boost productivity. Thus the workforce is able to produce more output in the same time.
Are you planning a survey or what sort of research that impact. I'm interested to implement the same survey in Serbia and compare the results
I will also be glad to cooperate. We can parallel explore and exchange data and results.
it is always better to have large number of Small units to work for the united goal
Large companies tend to be capital intensive with high rate of technology adoption. Small companies do create jobs at lower cost than large firms. There is room for both small and big firms. In terms of support, it would be good to support small firms because any support would reach more players. The size of firms can depend on the industry. For instance, big firm dominate in mining, power generation and so forth.
I am very interested in the economic history of different cities with regard to this question. Some company towns, like Pittsburgh, Birmingham, Rochester, and Detroit relied on big companies for growth in the past, but there are certainly sectors that seem important to some places that drive growth, e.g. Houston, Seattle, D.C., etc. I'm interested in comparing the firm size histories of cities like Austin, Raleigh, Charlotte, Oklahoma City, Denver, Nashville, and Louisville, comparted to those of Buffalo, Cleveland, Cincinnati, St. Louis, Pittsburgh, Detroit, and Birmingham. Does the political clout of large native industries inhibit economic innovation? Where would I go to find these answers?
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