A simultaneous equations model of performance, strategy and size is tested using fieldwork evidence on long-lived firms in Scotland. Estimation is by I3SLS, with correction for sample selection bias. The contributions of this paper are that it: (a) grounds estimation on fieldwork evidence; (b) calibrates performance and competitive strategy; (c) tests and models endogeneity; and (d) computes robust trade-off elasticities between firm size and performance. It shows how this trade-off provides the entrepreneur with two strong incentives: (i) to seek greater efficiency typically by an increase in the human capital of the ‘core’ workforce; (ii) to achieve higher levels of performance by adopting more diverse competitive strategies.
|Number of pages||33|
|Journal||International Journal of the Economics of Business|
|Early online date||18 Aug 2015|
|Publication status||Published - 2015|
Power, B., & Reid, G. C. (2015). Performance and strategy: simultaneous equations analysis of long-lived firms. International Journal of the Economics of Business, 22(3), 345-377. https://doi.org/10.1080/13571516.2015.1051751