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The Shift to the Entrepreneurial Society

The Shift to the Entrepreneurial Society

A Built Economy in Education, Sustainability and Regulation

Edited by Jean Bonnet, Marcus Dejardin and Antonia Madrid-Guijarro

In the constant challenge economies face to grow and adapt, entrepreneurship and innovation are considered key factors. This impressive book shows the complementary and decisive role that education, access to an efficient financial system, and regulation may have in creating an entrepreneurial society.

Chapter 17: Employer Enterprises in Portugal: Size Distribution Dynamics

Elsa de Morais Sarmento and Alcina Nunes

Subjects: business and management, entrepreneurship

Extract

Elsa de Morais Sarmento and Alcina Nunes INTRODUCTION Firm size distribution has always drawn a great deal of attention in Portugal, often related to the so-called lack of performance and competitiveness of Portuguese enterprises, in comparison to bigger sized international firms, which is thought to be due to the overall small dimension of the internal market (especially for nontradeables) and to the country’s type of specialization model. In the literature, the distribution of firms by size has received a considerable amount of attention, first related to regulation, competition and oligopoly issues. In the 1950s it was considered that economic theory had little to say about the distribution of firm sizes (Simon and Bonini, 1958). For several decades, the conventional wisdom was that the distribution of percentage changes in size was independent of firm size (also known as Gibrat’s law of proportionate effect). In particular, Simon and Bonini (1958) assume that Gibrat’s law (Gibrat, 1931) holds for firms above a critical minimum size level of the firm. In fact, Gibrat’s law provided the foundation for research into the relationship between entry, growth and survival in respect to firm size. More recent theoretical literature on industry evolution has emphasized the importance of evolutionary and learning effects (Jovanovic, 1982), research and development (Erikson and Pakes, 1995), sunk costs (Cabral, 1995), human capital (Rossi-Hansberg and Wright, 2004) and technology access and innovation (Goedhuys, 2007) in building production capacity. Moreover, more recent learning models take more than current size as explanatory variables. They also consider...

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