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Do Small Firms Breathe Heavily Down The Necks of Their Larger Brethren?

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  • Theodore Papadogonas

    (Department of Accounting and Finance, Athens University of Economics and Business, Greece)

  • Vassilis Droucopoulos

    (Department of Economics, University of Athens, Greece)

Abstract

Empirical studies in Industrial Economics have shown that most industries are characterized by the co-existence of a small number of large firms and a large number of small firms. According to a recent line of thought, the theory of strategic niches, small firms do not directly compete with large firms but prefer to occupy fringe markets, where they can achieve high profits. In this paper we test this hypothesis by comparing the relative specialization of small and large firms (measured by a novel variation of the well-known Balassa index) in Greek manufacturing. The results suggest that, contrary to the above-mentioned theory, on average it is large firms that choose to produce in product niches, and this is especially noticeable in industries with low concentration.

Suggested Citation

  • Theodore Papadogonas & Vassilis Droucopoulos, 2004. "Do Small Firms Breathe Heavily Down The Necks of Their Larger Brethren?," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 2(1), pages 59-65.
    • Handle: RePEc:seb:journl:v:2:y:2004:i:1:p:59-65
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    References listed on IDEAS

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    More about this item

    Keywords

    strategic niches; large-small firms;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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