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SME takeovers as a contributor to regional productivity gaps

Foreman-Peck, James S. and Nicholls, Tom 2013. SME takeovers as a contributor to regional productivity gaps. Small Business Economics 41 (2) , pp. 359-378. 10.1007/s11187-012-9444-x

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Abstract

New Economic Geography models typically predict centripetal economic development. One process by which this might be brought about is if large companies based in the core of the economy buy up and remove small dynamic enterprises from peripheral regions, thereby suppressing development outside the core. This hypothesis is investigated by analysing the very large UK administrative firm-level Business Structure Database. Contrary to the experience of big firms, more productive small businesses are more subject to takeover - although this effect is weaker if they are located in peripheral regions. Takeovers also increase the chances of a small and medium size enterprise (SME) closing, but the exit consequence is greater for the core region. Takeovers raise productivity after acquisition in all regions but by less for the most productive SMEs. Ignoring any productivity gains to acquiring firms, the positive impact in the core region during the years considered is slightly larger than in the periphery, principally because takeovers are more common in the core. As this impact is a contributor to regional divergence, policy should aim to improve the operation of the market for SMEs in the periphery.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
Uncontrolled Keywords: SMEs; takeovers; regional development; exits
Publisher: Springer Verlag
ISSN: 0921-898X
Last Modified: 04 Jun 2017 04:17
URI: http://orca.cf.ac.uk/id/eprint/35885

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