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Is small firm gardening good for local economic growth?

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  • Hart Hodges
  • Stein Østbye

Abstract

Based on panel data for the manufacturing and retail industries in a sample of 2645 US counties spanning the last two decades of the twentieth century, we find that firm size matters for industry growth. Contrary to previous research, our results suggest that there is a positive linkage between the average size of manufacturing and retail firms on the one hand and industry growth on the other. Our results are consistent with a Schumpeterian growth model, where bigger firms are needed to carry out effective Research and Development, leading to higher growth. The results, therefore, do not support the idea of small firm gardening as a local development strategy.

Suggested Citation

  • Hart Hodges & Stein Østbye, 2010. "Is small firm gardening good for local economic growth?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(8), pages 809-813.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:8:p:809-813
    DOI: 10.1080/13504850802481780
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    Cited by:

    1. Amitrajeet Batabyal & Peter Nijkamp, 2014. "Innovation, Decentralization, and Planning in a Multi-Region Model of Schumpeterian Economic Growth," Networks and Spatial Economics, Springer, vol. 14(3), pages 605-628, December.
    2. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2017. "On research and development in a model of Schumpeterian economic growth in a creative region," Technological Forecasting and Social Change, Elsevier, vol. 115(C), pages 69-74.
    3. Batabyal, Amitrajeet A. & Beladi, Hamid, 2016. "The effects of probabilistic innovations on Schumpeterian economic growth in a creative region," Economic Modelling, Elsevier, vol. 53(C), pages 224-230.
    4. Daunfeldt, Sven-Olov & Halvarsson, Daniel & Johansson, Dan, 2012. "A cautionary note on using the Eurostat-OECD definition of high-growth firms," HUI Working Papers 65, HUI Research.
    5. Anders Bornhäll & Sven-Olov Daunfeldt & Niklas Rudholm, 2013. "Sleeping Gazelles: High profits but no growth," SPRU Working Paper Series 2013-10, SPRU - Science Policy Research Unit, University of Sussex Business School.

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