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The Size Distribution of Businesses, Part I: A Benchmark Case

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  • John Sutton

Abstract

This paper examines the evolution of a skew distribution of firm sizes from the viewpoint of the ?Bounds? approach to market structure. It confines attention to the role played by non-strategic factors (statistical independence, and cost side-effects). A model is proposed, which leads to a prediction regarding the least skew size distribution which is likely to be observed. This distribution provides a benchmark relative to which the impact of strategic effects on the form of the size distribution may be assessed.

Suggested Citation

  • John Sutton, 1995. "The Size Distribution of Businesses, Part I: A Benchmark Case," STICERD - Economics of Industry Papers 09, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:09
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    File URL: https://sticerd.lse.ac.uk/dps/ei/ei9.pdf
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    References listed on IDEAS

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    1. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    2. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009, Elsevier.
    3. Pankaj Ghemawat & Barry Nalebuff, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(1), pages 167-186.
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    Cited by:

    1. Derbyshire, James & Garnsey, Elizabeth, 2015. "Are firm growth paths random? A further response regarding Gambler's Ruin Theory," Journal of Business Venturing Insights, Elsevier, vol. 3(C), pages 9-11.
    2. Boris Podobnik & Davor Horvatic & Alexander M. Petersen & Branko Urov{s}evi'c & H. Eugene Stanley, 2010. "Bankruptcy risk model and empirical tests," Papers 1011.2670, arXiv.org.
    3. Fujiwara, Yoshi & Di Guilmi, Corrado & Aoyama, Hideaki & Gallegati, Mauro & Souma, Wataru, 2004. "Do Pareto–Zipf and Gibrat laws hold true? An analysis with European firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 335(1), pages 197-216.
    4. Enrico Santarelli, 1998. "Start-up size and post-entry performance: the case of tourism services in Italy," Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 157-163, February.
    5. Audretsch, David B. & Santarelli, Enrico & Vivarelli, Marco, 1999. "Start-up size and industrial dynamics: some evidence from Italian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 965-983, October.
    6. Michael Pickford & Qing Gong Yang, 2014. "Comparing merger enforcement across jurisdictions -- New Zealand versus the European Union and the United States," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(1), pages 72-95, April.
    7. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    8. Fleischer, Manfred, 1997. "The inefficiency trap: strategy failure in the German machine tool industry," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 122877, December.

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