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The Size Distribution Of Firms: Geographical Perspectives

The Size Distribution Of Firms: Geographical Perspectives. ELIZABETH PYLE & MADS MORTENSEN. Overview. The Size Distribution of firms – the existence of small and large firms in modern economies The geographic scope of large firms – employment geographies

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The Size Distribution Of Firms: Geographical Perspectives

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  1. The Size Distribution Of Firms: Geographical Perspectives ELIZABETH PYLE & MADS MORTENSEN

  2. Overview • The Size Distribution of firms – the existence of small and large firms in modern economies • The geographic scope of large firms – employment geographies • The ‘spatial division of labour (SDL) – employment distributions • Conclusion/Discussion

  3. 1. The Size Distribution of Firms • the existence of corporate giants, and impressive variations in the size distribution of firms have been important characteristics of industrial economies throughout this century. • Population pyramid/Gibrats Law – number & size of firms represented by a positively skewed distribution

  4. 1. The Size Distributions of firms – the economies of scale argument • Occurs when the average cost of production declines with increasing size of activity • Diseconomies of Scale – increase in size may become inefficient • Causes of diseconomies –technological limits, supervision and communication, labor alienation etc • Highly Variable opportunities to take advantage of economies of scale

  5. 1. The Size Distributions of firms – the dual economy argument • Planning system firms &Market system firm • Contrast to economies of scale model • It cannot be assumed that the largest firms are the most efficient firms • The issue of subcontracting

  6. 1. The Size Distributions of firms – International variations in firm size distributions • Substantial Variations • National & cultural factors as well as economies of scale • National Variations in firm size distributions have deep historical roots • Small firm sector is playing at greater role

  7. 2.The Geographic distribution of employment within big firms • The size distribution of firms is mirrored by variations in the geographic scope of firms • Hakansonsmodel – firms first establish a strong local or regional base, then grow nationally and finally internationally

  8. 2.The Geographic distribution of employment within big firms – National employment map of corporations • Since 70’s, employment geographies of large corporations have been volatile • The biggest changes, in terms of job shedding, have occurred within corporations in mature industries such as iron and steel, shipping and and building • Cadburys Schwepps, Standard Electric & Phillips

  9. 2.The Geographic distribution of employment within big firms- Significance to foreign operations • As manufacturing firms grow there is typically pressure to internationalize operations by exporting and eventually by investing in foreign based facilities • Considerable variations exist • The integration of MNC’s (Mcnee 1958)

  10. 2.The Geographic distribution of employment within big firms – significance of acquisitions and mergers • Firms pov– investments + merger & acquisitions = long term motivations • Faster and less risk strategy • Increase of economic and geographicconcentration of power • Macmillan Bloedel Case

  11. 3. The spatial Division of Labour • 1. Sectoral division of labor occurs when regions specialize in particular industries and all the related skills • 2. intra sectoral division of labouroccurs within individual industries firms choose to specialize tasks and occupations by location. • New international Division of labor (NIDL)

  12. 3. The spatial Division of Labor – location hierarchies • SDL & NIDL both anticipate the agglomeration of control functions at the top of the urban hierarchy • The geographic distribution of the head offices and R&D; UK, Japan, Canada &US • R&D Strategies

  13. 3. The spatial Division of Labor – core periphery effects • 1. ‘cores’ where decisions are made about the allocation of investment, jobs and technology in periphery • 2. ‘cores’- highest paid and most stable jobs • Spin offs and local wealth generated by core functions • Contrasting ‘core periphery’ – less stable

  14. Conclusion/Discussion • Enormously varied • The SDL & NIDL have both captured important tendencies and grossly over simplified reality • Locational hierarchies of the largest firms and core periphery contrasts have proven more dynamic than anticipated • A Need to investigate the structure and strategies of firm's in diff segments.

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