Return to scale, the missing middle and policy implications for supporting firms’ development and technology upgrading
Keywords:
Economy, Technology development, Technology upgrading, Policy, Enterprise, Viet NamAbstract
In the current paper, we investigate the “missing middle” phenomenon of firm size distribution in Viet Nam. Results imply existence of both the “missing middle” as well as the increasing return to scale in aggregate production function of most industries in Vietnam. Such co-existence suggests that there are forces other than those traditionally mentioned in economic literature (Tybout, 2000) affecting the firm size. However, there are heterogeneities in the return to scale within industries that the middle-size firms have the lowest return to scale, compared with those of their small or large size counterparts. This result implies when Viet Nam’s firms develop intomiddle-sizeones they face significant challenges, not only in term of further developing into bigger sizes but also in term of remaining size efficiency comparing with small ones.
Code: 20122301
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References
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13. Klette, T. J. and Griliches, Z. (1996). “The inconsistency of common scale estimators when output prices are un observed and endogenous”. Journal of Economic Behavior and Organization, 11:343-346.
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15. Lucas, R. E. (1978). “On the size and distribution of business firm”. Bell Journal of Economics, 9:508-523.
16. Luttmer, E. G. J. (2007). “Selection, growth and the size distribution of firm”s. Quarterly Journal of Economics, 122:1103-1068.
17. Mansfield, E. (1962). “Entry, Gibrat’s law, innovation, and the growth of firms”. American Economic Review, 52:1023-1051.
18. Perez, C. and Ponce, C. J. (2015). “Disruption Costs, Learning by Doing, and Technology Adoption”. International Journal of Industrial Organization, Vol. 41, pp.64-75
19. Ramey, V. A. (1991). “Non-convex costs and the behavior of inventories”. The Journal of Political Economy, 99:45-61.
20. Rumelt, R. P. and Wensley, J. R. C. (1981). Stochastic and direct effect theories of the association between market share and profitability: an empirical discrimination. Working paper.
21. Tybout, J. R. (2000). “Manufacturing firms in developing countries: How well do they and why?”. Journal of Economic Literature, 38:11-44.
22. Verhoogen, E. (2020). “Firm‐Level Upgrading in Developing Countries”. CDEP‐CGEG Working paper No. 83. <https://cdep.sipa.columbia.edu/cdep-cgegworking-paper-no-83>
23. Vinning, D. R. (1976). “Auto-correlated growth rates and the Pareto law: A further analysis”. Journal of Political Economy, 84:369-380.
24. Westbrook, M. D. and Tybout, J. R. (1992). “Estimating returns to scale with large, imperfect panels:an application to Chilean manufacturing industries”. The World Bank Economic Review, 7:85-112.
2. Baldwin, J. and Gorecki, P. (1986). The role of scale in Canada-US productivity differences in the manufacturing sector: 1970-1979. University of Toronto Press.
3. Biesebroeck, J. V. (2005). "Firm Size Matters: Growth and Productivity Growth in African Manufacturing". Economic Development and Cultural Change, 53(3): 545-583.
4. Brown, D. J. (1991). “Equilibrium analysis with non-convex technologies”. Handbook of Mathematical Economics, Vol. 4.
5. Christensen, L. R. and Greene, W. H. (1976). “Economies of scale in U.S. electric power generation”. The Journal of Political Economy, 84:655-676.
6. Christensen, L. R., Jorgenson, D., and Lau, L. (1973). “Transcendental logarithmic production frontier”. The Review of Economics and Statistics, pages 28-45.
7. Farrell, M. J. (1957). “The measurement of productive efficiency”. Journal of the Royal Statistical Society, 3:253-290.
8. Fernandes, A. M. and Paunov, C. (2015). “The risks of innovation: are innovating firms less likely to die?” The Review of Economics and Statistics, 97(3): 638-653.
9. Ijiri, Y., Simon, and Hebert (1977). Skew Distribution and the Size of Business Firms.North-Holland, Amsterdam, Minnesota.
10. Jacques, M. and Jordi, J. (2005). “Panel-data estimates of the production function and the revenue function: What differences does it make?” Scandinavian Journal of Economics, 107.
11. Jovanovic, B. and Yaw Nyarko, Y. (1996). “Learning by Doing and the Choice of Technology”. Econometrica, Vol. 64 (6), pp. 1299-1310.
12. Karsten, J. (2005). Economies of scale: A survey of the empirical literature. Contemporary issues in urban and regional economics. New York: Nova Science Publ.
13. Klette, T. J. and Griliches, Z. (1996). “The inconsistency of common scale estimators when output prices are un observed and endogenous”. Journal of Economic Behavior and Organization, 11:343-346.
14. Levinsohn, J. and Petrin, A. (2003). “Estimating production functions using inputs to control for un observables”. Review of Economic Studies, 70:317-342.
15. Lucas, R. E. (1978). “On the size and distribution of business firm”. Bell Journal of Economics, 9:508-523.
16. Luttmer, E. G. J. (2007). “Selection, growth and the size distribution of firm”s. Quarterly Journal of Economics, 122:1103-1068.
17. Mansfield, E. (1962). “Entry, Gibrat’s law, innovation, and the growth of firms”. American Economic Review, 52:1023-1051.
18. Perez, C. and Ponce, C. J. (2015). “Disruption Costs, Learning by Doing, and Technology Adoption”. International Journal of Industrial Organization, Vol. 41, pp.64-75
19. Ramey, V. A. (1991). “Non-convex costs and the behavior of inventories”. The Journal of Political Economy, 99:45-61.
20. Rumelt, R. P. and Wensley, J. R. C. (1981). Stochastic and direct effect theories of the association between market share and profitability: an empirical discrimination. Working paper.
21. Tybout, J. R. (2000). “Manufacturing firms in developing countries: How well do they and why?”. Journal of Economic Literature, 38:11-44.
22. Verhoogen, E. (2020). “Firm‐Level Upgrading in Developing Countries”. CDEP‐CGEG Working paper No. 83. <https://cdep.sipa.columbia.edu/cdep-cgegworking-paper-no-83>
23. Vinning, D. R. (1976). “Auto-correlated growth rates and the Pareto law: A further analysis”. Journal of Political Economy, 84:369-380.
24. Westbrook, M. D. and Tybout, J. R. (1992). “Estimating returns to scale with large, imperfect panels:an application to Chilean manufacturing industries”. The World Bank Economic Review, 7:85-112.
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Published
05-01-2021
How to Cite
Dat, V. H., Hien, P. T., & Hai, N. N. (2021). Return to scale, the missing middle and policy implications for supporting firms’ development and technology upgrading. Journal SCIENCE AND TECHNOLOGY POLICIES AND MANAGEMENT, 9(4), 18–38. Retrieved from https://vietnamstijournal.net/index.php/JSTPM/article/view/352
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STUDIES OF STRATEGIES AND MANAGEMENT
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