IDEAS home Printed from https://ideas.repec.org/a/kap/revind/v57y2020i3d10.1007_s11151-020-09782-y.html
   My bibliography  Save this article

Entrepreneurial Firms: With Whom Do They Compete, and Where?

Author

Listed:
  • Marc Cowling

    (University of Derby)

  • Simon Peter Nadeem

    (University of Derby)

Abstract

Many different theories that have attempted to explain why smaller entrepreneurial firms exist. Surprisingly, very little empirical work has tested the obvious questions, such as: Are small firm’s price-takers in highly competitive markets? Who do they compete against? What if they try to raise prices? Does innovation offer niche market protection? Using a large UK data set our key findings are that less than 5% of entrepreneurial firms operate in markets where they effectively have no competition and a quarter of all small firms would lose at least a third of their sales if they raised prices by 10%.

Suggested Citation

  • Marc Cowling & Simon Peter Nadeem, 2020. "Entrepreneurial Firms: With Whom Do They Compete, and Where?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 559-577, November.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:3:d:10.1007_s11151-020-09782-y
    DOI: 10.1007/s11151-020-09782-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11151-020-09782-y
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11151-020-09782-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Conyon, M & Machin, Stephen, 1991. "The Determination of Profit Margins in UK Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 569-582, June.
    2. Joe S. Bain, 1951. "Relation of Profit Rate to Industry Concentration: American Manufacturing, 1936–1940," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 65(3), pages 293-324.
    3. Zoltan J. Acs & David B. Audretsch, 2008. "Innovation, Market Structure, and Firm Size," Chapters, in: Entrepreneurship, Growth and Public Policy, chapter 2, pages 16-23, Edward Elgar Publishing.
    4. Paul M. Sweezy, 1939. "Demand Under Conditions of Oligopoly," Journal of Political Economy, University of Chicago Press, vol. 47(4), pages 568-568.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. Joan Robinson, 1953. "The Production Function and the Theory of Capital," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(2), pages 81-106.
    7. H. Robert Dodge & Sam Fullerton & John E. Robbins, 1994. "Stage of the organizational life cycle and competition as mediators of problem perception for small businesses," Strategic Management Journal, Wiley Blackwell, vol. 15(2), pages 121-134, February.
    8. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-274, August.
    9. Panzar, John C, 1980. "Regulation, Deregulation, and Economic Efficiency: The Case of the CAB," American Economic Review, American Economic Association, vol. 70(2), pages 311-315, May.
    10. Niman, Neil B, 1991. "The Entrepreneurial Function in the Theory of the Firm," Scottish Journal of Political Economy, Scottish Economic Society, vol. 38(2), pages 162-176, May.
    11. Jeffrey G. Covin & Dennis P. Slevin, 1989. "Strategic management of small firms in hostile and benign environments," Strategic Management Journal, Wiley Blackwell, vol. 10(1), pages 75-87, January.
    12. Joan Robinson, 1934. "What is Perfect Competition?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 49(1), pages 104-120.
    13. Bradburd, Ralph M & Ross, David R, 1989. "Can Small Firms Find and Defend Strategic Niches? A Test of the Porter Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 258-262, May.
    14. G. J. Stigler, 1972. "Perfect Competition, Historically Contemplated," Palgrave Macmillan Books, in: Charles K. Rowley (ed.), Readings in Industrial Economics, chapter 7, pages 105-130, Palgrave Macmillan.
    15. Edward H. Chamberlin, 1937. "Monopolistic or Imperfect Competition?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(4), pages 557-580.
    16. Baumol, William J & Bailey, Elizabeth E & Willig, Robert D, 1977. "Weak Invisible Hand Theorems on the Sustainability of Multiproduct Natural Monopoly," American Economic Review, American Economic Association, vol. 67(3), pages 350-365, June.
    17. Fama, Eugene F & Laffer, Arthur B, 1972. "The Number of Firms and Competition," American Economic Review, American Economic Association, vol. 62(4), pages 670-674, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alex Coad & Sven-Olov Daunfeldt & Daniel Halvarsson, 2022. "Amundsen versus Scott: are growth paths related to firm performance?," Small Business Economics, Springer, vol. 59(2), pages 593-610, August.
    2. Bernadette Power & Gavin C. Reid, 2023. "Lifting the hood of supply and demand for trademarks of start‐ups: Partial observability estimates," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 311-321, January.
    3. Alex Coad, 2022. "Lumps, Bumps and Jumps in the Firm Growth Process," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 18(4), pages 212-267, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ruyun (Ivy) Feng & Michael D. Kimbrough & Sijing Wei, 2022. "The role of information transparency in the product market: an examination of the sustainability of profitability differences," Review of Accounting Studies, Springer, vol. 27(2), pages 668-705, June.
    2. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    3. Richard Arend, 2013. "Ethics-focused dynamic capabilities: a small business perspective," Small Business Economics, Springer, vol. 41(1), pages 1-24, June.
    4. J.W.B. Bos & I. Chan & J. Kolari & J. Yuan, 2009. "A Fallacy of Division: The Failure of Market Concentration as a Measure of Competition in U.S. Banking," Working Papers 09-33, Utrecht School of Economics.
    5. Richard Arend, 2014. "Social and Environmental Performance at SMEs: Considering Motivations, Capabilities, and Instrumentalism," Journal of Business Ethics, Springer, vol. 125(4), pages 541-561, December.
    6. Marcos Lima & Marcelo Resende, 2004. "Profit margins and business cycles in the Brazilian industry: a panel data study," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 923-930.
    7. Maryanchyk Ivan, "undated". "Market Structure and Profitability in a Transition Economy: Ukrainian Case," EERC Working Paper Series 03-06e, EERC Research Network, Russia and CIS.
    8. Jonathan Kluberg & Georgia Perakis, 2012. "Generalized Quantity Competition for Multiple Products and Loss of Efficiency," Operations Research, INFORMS, vol. 60(2), pages 335-350, April.
    9. O'Shaughnessy, Eric, 2019. "Non-monotonic effects of market concentration on prices for residential solar photovoltaics in the United States," Energy Economics, Elsevier, vol. 78(C), pages 182-191.
    10. Maman Setiawan & Grigorios Emvalomatis & Alfons Oude Lansink, 2015. "Price Rigidity and Industrial Concentration: Evidence from the Indonesian Food and Beverages Industry," Asian Economic Journal, East Asian Economic Association, vol. 29(1), pages 61-72, March.
    11. Yossi Spiegel, 2021. "The Herfindahl‐Hirschman Index and the Distribution of Social Surplus," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 561-594, September.
    12. Abubakar, Yazid Abdullahi & Hand, Chris & Smallbone, David & Saridakis, George, 2019. "What specific modes of internationalization influence SME innovation in Sub-Saharan least developed countries (LDCs)?," Technovation, Elsevier, vol. 79(C), pages 56-70.
    13. Xu, Fei & Liu, Qian & Zheng, Xingdong & Cao, Luqi & Yang, Mian, 2022. "Research on the impact of China's high-speed rail opening on enterprise market power: Based on the perspective of market segmentation," Transport Policy, Elsevier, vol. 128(C), pages 121-137.
    14. Tauman, Yair & Urbano, Amparo & Watanabe, Junichi, 1997. "A Model of Multiproduct Price Competition," Journal of Economic Theory, Elsevier, vol. 77(2), pages 377-401, December.
    15. Tanveer Ahmad Khan & Indrani Chakraborty, 2022. "Dynamic Interactions Between Structure and Performance in the Textile and Clothing Industry in India: An Econometric Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 173-209, March.
    16. Cruz-García, Paula & Fernández de Guevara, Juan & Maudos, Joaquín, 2021. "Bank competition and multimarket contact intensity," Journal of International Money and Finance, Elsevier, vol. 113(C).
    17. Evan Kraft, 2006. "How Competitive Is Croatia's Banking System?," Working Papers 14, The Croatian National Bank, Croatia.
    18. Stefan Folster & Sam Peltzman, 1997. "The Social Costs of Regulation and Lack of Competition in Sweden: A Summary," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 315-352, National Bureau of Economic Research, Inc.
    19. Ilona Bažantová & Jan Horych, 2022. "Konkurence a monopol v předkeynesovské neoklasice a koncepce J. Robinsonové a E. Chamberlina [Competition and Monopoly in Pre-Keynesian Neoclassicism and the Concepts of J. Robinson and E. Chamberl," Politická ekonomie, Prague University of Economics and Business, vol. 2022(3), pages 361-382.
    20. Frederick Guy, 2013. "Small, Local and Cheap? Walkable and Car-oriented Retail in Competition," Spatial Economic Analysis, Taylor & Francis Journals, vol. 8(4), pages 425-442, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:revind:v:57:y:2020:i:3:d:10.1007_s11151-020-09782-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.