Bigger is better, says EU study

12th of September 2012
Bigger is better, says EU study

Large companies contribute disproportionately more to a country's economic performance than smaller ones, according to a new EU-funded survey.

Bigger corporations are more productive, they pay higher wages, enjoy higher profits, and are more successful in international markets, said the report by European Firms in a Global Economy (EFIGE), an EU-funded project.

Therefore, a country's economic performance can be linked to its number of big corporations, says the survey, which was carried out under the supervision of Brussels-based think tank Bruegel.

This is one of the conclusions in EFIGE's new report, Breaking down the barriers to firm growth in Europe. The report systematically explores the interaction between firm and country characteristics through a survey of about 15,000 manufacturers in Austria, France, Germany, Hungary, Italy, Spain and the United Kingdom.

Differences in the firm size profile of different European countries are dramatic, according to EFIGE. Companies in Spain and Italy are, for example, on average 40 per cent smaller than those in Germany.

The low average firm size translates into a chronic lack of large firms. In Spain and Italy a mere five per cent of manufacturing firms have more than 250 employees, compared to a much higher 11 per cent in Germany. The average firm size in Spain and Italy is, respectively, 49.3 and 42.7 employees, compared to 76.4 on average in Germany.

In all the countries in the survey, the exporting firms are also found to be larger and do more research and development.

"This suggests that barriers to R&D and trade are the main culprits that slow down firm growth. Countries that face higher trade costs provide fewer opportunities for businesses to become large. And a relative absence of R&D spending puts a break on firm growth, leading to a size distribution skewed towards smaller firms," the report said.

President of European Small Business Alliance (ESBA), a non-party political group, David Caro commented on the report: "There is a paradox to be found here. We all agree that small and medium seized enterprises (SMEs) are the 'backbone of the European economy' and we look to our small companies to get us out of the crisis, yet large businesses still contribute disproportionately more to our economy.

"Unfortunately this reaffirms the message that we have been voicing for years: cut down on the regulatory and administrative burden for SMEs, improve access to and cost of finance and allow small businesses to prosper, innovate and grow."



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