Discussion: View Thread

Hi Rich:

Your conjecture places you in excellent company.  George Stigler once said: "Men should, in general, enter smaller companies, the greater their ability."  However, since output equals effort times ability, we must also assess the impact of firm size on effort.  There is a vast literature in labor economics on the monitoring and evaluation of worker effort and its resulting impact on wages and worker productivity (e.g., papers by Garen, Lazear). These papers model worker preferences for wage and leisure and more specifically, their incentives to supply higher levels of effort.  George Hendrikse published a theoretical paper in Small Business Economics (see reference below), which reported that more productive workers tend to migrate to small firms, due to free riding at large firms (which seems plausible, since employees are often working in teams these days, and monitoring is more difficult at large firms).  An empirical implication of his model, is that industries with both small and large firms will be more productive than an industry containing only large companies.  This finding could easily be confirmed with establishment-level data and the rest of your conjectures could be tested with the new generation of matched employer-employee data (I have several papers using these data). 

2) Another relevant stream of research is the work by Zoltan Acs and David Audretsch, who conducted a series of empirical studies at the firm level (see references below) demonstrating that small firms tended to innovate at a faster rate than large firms (in the manufacturing sector).  This finding varied substantially across manufacturing industries (e.g., in the computer industry and process control instruments, entrepreneurial companies were the key source of critical innovations, while in pharmaceuticals and aircraft, large companies dominated innovative activity). 

Best regards,

Don

Dr. Donald S. Siegel

Dean and Professor

School of Business

University at Albany, SUNY

1400 Washington Avenue

Albany, NY 12222

DSiegel@uamail.albany.edu

http://www.albany.edu/business/

http://www.albany.edu/business/faculty_siegel.shtml

http://econpapers.repec.org/RAS/psi32.htm

References

Acs, Zoltan J. and David B. Audretsch (1987), "Innovation, Market Structure and Firm Size." Review of Economics and Statistics 69(4), 567–575.

Acs, Zoltan J. and David B. Audretsch (1988), "Innovation in Large and Small Firms: An Empirical Analysis." American Economic Review 78(4), 678–690.

\

Acs, Zoltan J. and David B. Audretsch (1990), Innovation and Small Firms. Cambridge, MA: MIT Press.

Acs, Zoltan J. and David B. Audretsch , eds. (1993), Small Firms and Entrepreneurship: An East–West Perspective. Cambridge, MA: Cambridge University Press.

Hendrikse, George W. J. (1992), "Selection of Workers and Firm Heterogeneity," Small Business Economics, 4(2), 105-111.  

Stigler, George J. (1962), "Information in the Labor Market', Journal of Political Economy 70, 94-105.

************************************** This message is from ENTREP which is sponsored by the Entrepreneurship Division of the Academy of Management. Please do not post messages with attached files. Commercial messages or spammed messages are not allowed on the list. The use of auto-responder "out-of-office" messages may also lead to your removal from the list. You can manage your subscription options, including joining or leaving the list here: http://aomlists.pace.edu/scripts/wa.exe?SUBED1=entrep&A=1 If you have questions or need help, please contact Dr. John Bunch jbunch@benedictine.edu. Ventures HO!