Management Summary Research Study „Firm Size Distribution in the Central European Context“

This article analyzes the distribution of firms by size in six selected countries in 2012 and 2017. Estimates are always made for the whole economy and two subgroups of firms. The Visegrad Four countries (Czech Republic, Hungary, Poland and Slovakia) with similar economic activity and neighboring economically more developed countries, Germany and Austria, are compared. As the main objective of the article, we describe the distribution of firms by verifying the validity of Zipf’s law in selected economies and their sectors. The size of companies has always been measured by sales revenues. Our results confirm the positively skewed distributed sizes of companies, but Zipf’s law does not apply to the distribution of all companies by the magnitude of sales in the whole economy (or in an economic subgroup), but only on sections in the right part of the distribution (companies with higher turnover within the whole economy), which is in line with numerous research studies presented where Zipf’s law only applies to companies located in the upper tail of the distribution or, more precisely, from a certain minimum company size.

This article contributes to the understanding of the distribution of firms in economies or in their industries. Knowledge of the proportion of representation of large and small firms is important for estimating the macroeconomic impacts of the change, if any, in the distribution of firms. The more market power is concentrated in a small fraction of firms, the better chances that even minor changes in the distribution of firms can have relatively large macroeconomic impacts, either in terms of employment or the volume of production offered. In distribution of firms according to the power law, shocks (changes) on firm level can cause changes also on aggregate level.

Target groups of stakeholders: Business support policy makers, entrepreneurs

Citation: Štamfestová, P., Sobíšek, L., & Hnilica, J. (2023). Firm size distribution in the the central European context. Central European Business Review 12/5, pp. 1-24. DOI: 10.18267/j.cebr.345

Source: https://cebr.vse.cz/getrevsrc.php?identification=public&mag=cbr&raid=620&type=fin&ver=2