Flexibility and small firms' survival: further evidence from Malaysian manufacturing

Norashidah Mohamed Nor (), Md. Nor Nor Ghani, Ahmad Zainuddin Abdullah and Suhaila Abd. Jalil

Applied Economics Letters, 2007, vol. 14, issue 12, 931-934

Abstract: This study investigates the role played by production flexibility in explaining the lasting presence of small firms alongside their larger counterparts in the market. The production flexibility hypothesis postulates that the market place provides room for both large and small firms because large firms benefit from low minimum average costs and static production efficiency, while small firms, with higher minimum average costs, are more flexible. Unlike previous studies that used data from developed economies, this study tests the hypothesis using industry data from a developing country, Malaysia. Results show that there exist a negative relationship between firm size and sales variability suggesting that large and small firms each have their own efficiency niches.

Date: 2007
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DOI: 10.1080/13504850600706065

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