The Effect of SME Productivity Increases on Large Firm Productivity in the EU

22 Pages Posted: 4 Apr 2019

See all articles by André van Stel

André van Stel

Trinity College Dublin

Boris Lokshin

Maastricht University, School of Business and Economics

Nardo de Vries

Maastricht University

Date Written: May 2019

Abstract

We examine the impact of labour productivity growth of small and medium‐sized enterprises (SMEs) on labour productivity growth of large firms in a 19‐year panel of 26 European countries. We apply a dynamic panel data model that allows for macro‐level interdependencies in productivity between small and large firms. Our main finding concerns a sizable positive effect of labour productivity increases of SMEs on the productivity of large firms. This positive effect is especially evident for medium‐sized and small firms (rather than micro firms). Furthermore, the impact of SME productivity on large‐firm productivity is increasing with the size of the SME sector. Our analysis indicates that scale effects play a role in the transmission of productivity effects from SMEs to large firms, both in terms of the size of individual SMEs (medium‐sized and small versus micro) and in terms of the share of the SME sector in the economy.

Suggested Citation

van Stel, André and Lokshin, Boris and de Vries, Nardo, The Effect of SME Productivity Increases on Large Firm Productivity in the EU (May 2019). Kyklos, Vol. 72, Issue 2, pp. 332-353, 2019, Available at SSRN: https://ssrn.com/abstract=3366475 or http://dx.doi.org/10.1111/kykl.12198

André Van Stel (Contact Author)

Trinity College Dublin ( email )

2-3 College Green
Dublin, Leinster D2
Ireland

Boris Lokshin

Maastricht University, School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3697 (Phone)
+31 43 325 4893 (Fax)

Nardo De Vries

Maastricht University

P.O. Box 616
Maastricht, 6200MD
Netherlands

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