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SBE Lect 3_ Part 5: Ch3.5- Ch4 (Wages in small and large firm (Large…
SBE Lect 3_ Part 5: Ch3.5- Ch4
Supporting gazelles?
Better to focus on gazelles than mice: high churn rates, low innovation and productivity rates amongst mice whilst gazelles produce jobs
◦ Elephants are incumbent firms and could usually survive on their own
Alternatively, you might argue that the government should not directly intervene in the economy by developing particular programmes to support entrepreneurs
◦ Just focus on the ‘rules of the game’ (Baumol, 1990): Improve entrepreneurial framework conditions
◦ Try to account for deadweight loss (e.g., the firm would have taken up business advice regardless of government business advice assistance) and displacement (where the intervention allows the firm to increase market share from other firms)
Dutch situation
Considerable soft support
Hard support for high-growth businesses and innovators (guest lecture)
Working in a small or large business
Quantity of job generation vs. quality of generated jobs
Training
Safety and Work satisfaction
Income and fringe benefits
slide 22 wages sb versus lb
Wages in small and large firm
Small businesses
Employ lower pay groups (e.g., young people, ‘low’ skilled)
Relatively young businesses
Still ‘
size-wage premium’
persists after controlling for such factors
Large businesses pay more because they:
Better qualified workforce
Have higher performance standards
Can’t distinguish between good and bad workers
Have more market power (higher profits)
Large businesses provide greater fringe benefits
slide 23/32
Lack of formal training
Explanation 1: There are ‘barriers’
Entrepreneurs are unaware of the benefits of training
The ‘right’ training (e.g., costs and appropriateness) is not offered
Entrepreneurs have ‘negative’ attitudes towards training
Approach assumes that small businesses training practices should resemble that of larger businesses
Explanation 2: Market-based explanation
assumes that entrepreneurs are
‘informed’
rather than
‘ignorant’
consumers of training
Limited ‘slack’ resources to support training
Training increases likelihood of poaching
Entrepreneurs favour short term horizon
Gaining qualifications increases switching jobs
Diversity of training needs
Entrepreneurial resistance (e.g., what is the value of training?)
Training your workers leads to both firm and individual worker benefits - productivity
◦ So why are small businesses less likely to formally train their workers?