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Institutional Effects on the Evolution of the Size Distribution of Firms

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Author Info
Henrekson, Magnus () (The Research Institute of Industrial Economics)
Johansson, Dan (Royal Institute of Technology (KTH), Industrial Economics and Management/KTH-Indek)

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Abstract

In this paper it is argued that the size distribution of firms may largely be determined by institutional factors. This hypothesis is tested in an exploratory fashion by studying the evolution of the size distribution of firms over time in Sweden for a period spanning from the late 1960s to the early 1990s. The data used is divided into finer size classes compared to most previous studies. This gives more scope for investigating the impact of institutions. Moreover, we use a unique data set, starting in 1984, to take account of corporate groups and government ownership. The analysis shows a poor development for intermediate-sized (10-199 employees) firms. This is likely to reflect the existence of a threshold that many firms are either unwilling or unable to cross. The analysis of the institutions and rules of the game determining the entrepreneurial and business conditions in Sweden indicate that the conditions have been unfavorable for small firms, and hence that too few small firms have managed to grow out of the smallest size classes. The conclusion is supported by an international comparison of the number of firms in different size classes. Data indicate that Sweden has fewer small (10-99) employees), and more large (500+) firms per capita than other European countries.

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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 497.

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Length: 20 pages
Date of creation: 01 Mar 1998
Date of revision:
Publication status: Published in Small Business Economics, 1999, pages 13.
Handle: RePEc:hhs:iuiwop:0497

Note: Published in Small Business Economics, Vol. 12, No. 1, 1999.
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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Related research
Keywords: Business taxation Industrial policy Industrial structure Size distribution

Other versions of this item:

Find related papers by JEL classification:
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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  1. Guner, Nezih & Ventura, Gustavo & Xu, Yi, 2007. "Macroeconomic Implications of Size-Dependent Policies," CEPR Discussion Papers 6138, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Dietrich Franz, 2006. "Welfarism, Preferencism, Judgmentism," Research Memoranda 005, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  3. Henrekson, Magnus & Rosenberg, Nathan, 2000. "Incentives for Academic Entrepreneurship and Economic Performance: Sweden and the United States," Working Paper Series in Economics and Finance 362, Stockholm School of Economics. [Downloadable!]
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  4. Henrekson, Magnus & Johansson, Dan, 2008. "Gazelles as Job Creators – A Survey and Interpretation of the Evidence," Working Paper Series 733, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  5. Henrekson, Magnus & Jakobsson, Ulf, 2003. "The Swedish Model of Corporate Ownership and Control in Transition," Working Paper Series in Economics and Finance 521, Stockholm School of Economics, revised 16 Apr 2003. [Downloadable!]
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  6. Raquel Fonseca & Natalia Utrero, 2006. "Employment Protection Laws, Barriers to Entrepreneurship, Financial Markets and Firm Size," Working Papers 454, RAND Corporation Publications Department. [Downloadable!]
  7. Orietta Marsili & Ammon Salter, 2005. "'Inequality' of innovation: skewed distributions and the returns to innovation in Dutch manufacturing," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 14(1-2), pages 83-102, January. [Downloadable!] (restricted)
  8. Henrekson, Magnus & Jakobsson, Ulf, 2000. "Where Schumpeter was Nearly Right - The Swedish Model and Capitalism, Socialism and Democracy," Working Paper Series 533, Research Institute of Industrial Economics. [Downloadable!]
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  9. Henrekson, Magnus & Rosenberg, Nathan, 2000. "Designing Efficient Institutions for Science-Based Entrepreneurship: Lessons from the US and Sweden," Working Paper Series in Economics and Finance 410, Stockholm School of Economics. [Downloadable!]
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  10. Stenkula, Mikael, 2006. "The European Size Distribution of Firms and Employment," Working Paper Series 683, Research Institute of Industrial Economics. [Downloadable!]
  11. Verheul, I. & Stel, A.J. van & Thurik, A.R., 2005. "Explaining Female and Male Entrepreneurship at the Country Level," Research Paper ERS-2005-089-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
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  12. Ingrid Verheul & Andre van Stel & Roy Thurik, 2004. "Explaining female and male entrepreneurship across 29 countries," Discussion Papers on Entrepreneurship, Growth and Public Policy 2004-08, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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  13. Orietta Marsili, 2006. "Stability and Turbulence in the Size Distribution of Firms: Evidence from Dutch Manufacturing," International Review of Applied Economics, Taylor and Francis Journals, vol. 20(2), pages 255-272, April. [Downloadable!] (restricted)
  14. Nyström, Kristina, 2008. "Regional Institutional Environment and Swedish Regional New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 142, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
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