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SBE Lect 1Part 3: Ch1-SB- The big picture (Complementarity of large and…
SBE Lect 1Part 3: Ch1-SB- The big picture
Final 3 key differences
Finance
◦ Limited choice versus wider choice
◦ LB have better access to finance (quantity / quality)
Political influence
◦ Low versus high
◦ LB have more political power
Investment
◦ Low versus high
◦ LB focus on investment / R&D
Complementarity of large and small firms
Large provides efficiency
Small provides
◦ Filling market niches
◦ Flexibility; customization; innovation
◦ Undermining entry barriers
◦ Inhibiting cartels / collusion
Generalizing with caveats (see Case 1)
◦ Small – uncertainty, diversity, flexibility, failure
◦ Large – reliability, brand, market power, influence
Dynamic complementarity over the life cycle of an industry
Summary Ch1
Uncertainty is multidimensional
Internal vs. external uncertainty
◦ Market uncertainty
◦ Customer uncertainty
◦ Aspirational uncertainty
Risk and uncertainty are different
◦ Entrepreneurs work in uncertain environment
◦ Uncertainty provided opportunities for entrepreneurship
Key differences between large and small businesses
◦ Most importantly: The SB does not have market power
◦ Stylized differences ,generalizations fail sometimes short
Key learning objectives: CASE 1 – COMPETITION AT THE CREMATORIUM
Become better aware of the hazard of making generalizations about competition between (small) businesses
Be able to make judgments on the issue of market power and how it relates to smaller businesses