The Effect of Restructuring the Organization of Production on Economic Growth

The shift of economic activity from large towards small units in manufacturing industries in developed countries has been widely documented.2 This shift is one of the most important dimensions of the industrial restructuring process which has taken place in the last quarter of the 20th century. The extent of the employment shift away from large firms and/or establishments has been different across countries but has been quite substantial in many cases. CARLSSON (1996, 1999), for example, shows for U.S. manufacturing that the employment share of the Fortune 500 firms has decreased from almost 80% in 1975 to 65% in 1990 and to 58% in 1996. A range of reasons for the decline in the share of largeness in manufacturing have been discussed in the literature, ranging from declining importance of economies of scale to manufacturing firms returning to core activities. In the current study an investigation is made on whether the extent of the shift of economic activity from large to small businesses has affected economic performance. This part of the chapter draws on CARREE (2001). In addition the size class distributions in the German and U.S. manufacturing industries in a recent year (1997) are compared. The main motivation behind the topic of this study is that consequences of the increased role for small and new enterprises have been barely examined empirically, even though the industrial structures and the speed of the industrial restructuring process have been different across countries and industries.