The economics of small and medium-sized industries is a separate field of research. This section presents an introduction to the features of small and medium-sized industries, which focuses on contextual differences between small and large firms −

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Firm Size

The strength of small and medium-sized industries may be defined in various ways. Most definitions depend on statistical criteria. Turnover is sometimes utilized, but the most common criterion is the size of the workforce.

Goals & Strategy

Within the microeconomic theory, labor is mostly treated as an input in the production function, and decisions related to the optimal allocation of the production factors are made independent of the utility that employees derive from their work. The aim is usually considered to be profit maximization.

Organizational Culture

The matrix dimension of organizational culture highlights the underlying set of key values, beliefs, understandings, and norms distributed within an organization’s workforce. These underlying values related to ethical behavior and commitment to efficiency or to colleagues, customers, sponsors or other stakeholders.

Organizational Technology

Differences in market power, organizational structure and production technologies lead to diseconomies of scale for small firms. The influence of production technologies is, however, decreasing, as recent developments in ICT technologies have limited the minimum efficient scale of many production technologies, reducing the diseconomies of scale due to production technologies for SMEs.

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