What is the relationship of economic growth to the size of firm.

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pohnpei397 eNotes educator| Certified Educator

This is a matter of some contention in economics.  To my knowledge, there is no clear answer.

One of the better-known theories this field is that of Hernando De Soto.  He argues that corruption in government favors big firms over small in the developing world.  He argues that large firms are, therefore, associated with corrupt and stagnant economies.

However, there are other scholars who have attempted to confirm this relationship empirically and have come to disagree with it.  One example of this is in the article I have linked to in the williams.edu link.  This paper argues that there is no clear correlation between firm size and economic growth in a country.

There is, as I have said, no consensus on this.  The other link I have provided argues that larger firms contribute more to growth.  It says that they are able to invest in research and development and can enjoy economies of scale.  This allows them to be a cause of economic growth.