Peripherality and the Impact of SME Takeovers

James Foreman-Peck and Tom Nicholls

No E2008/9, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: New Economic Geography models typically predict centripetal economic development. One process by which this might be brought about is if large companies based in the core of the economy buy up and remove small dynamic enterprises from peripheral regions, thereby suppressing development outside the core. This hypothesis is investigated by analysing the very large UK administrative firm-level Business Structure Database. Contrary to the experience of big firms, more productive small businesses are more subject to takeover - although this effect is weaker if they are located in peripheral regions than in the core. Takeovers also increase the chances of a small and medium size enterprise (SME) closing, but the exit consequence is greater for the core region. Takeovers raise productivity after acquisition in all regions but by less for the most productive SMEs. Ignoring any productivity gains to acquiring firms, the positive impact in the core region during the years considered is slightly larger than in the periphery, principally because takeovers are more common in the core. As this impact is a contributor to regional divergence, policy should aim to improve the operation of the market for SMEs in the periphery.

Keywords: SMEs; takeovers; regional development; exits (search for similar items in EconPapers)
JEL-codes: D21 L23 R11 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2008-04, Revised 2012-07
New Economics Papers: this item is included in nep-ent and nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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