Is small firm gardening good for local economic growth?

Hart Hodges and Stein Østbye

Applied Economics Letters, 2010, vol. 17, issue 8, 809-813

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.

Date: 2010
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DOI: 10.1080/13504850802481780

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