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Profitability of small- and medium-sized enterprises in Marshall’s time: sector and spatial heterogeneity in the nineteenth century

Bennett, Robert J, Smith, Harry, Montebruno, Piero ORCID: 0000-0001-8010-7446 and Van Lieshout, Carry (2022) Profitability of small- and medium-sized enterprises in Marshall’s time: sector and spatial heterogeneity in the nineteenth century. Cambridge Journal of Economics, 46 (1). 219 - 249. ISSN 0309-166X

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Identification Number: 10.1093/cje/beab055

Abstract

New data on profit heterogeneity of small- and medium-sized firms for 1861–81 in England and Wales are used to reinterpret Marshall's contemporary insights. Profit level differences are chiefly explained by location, mainly urbanisation effects. But profitability (profit per worker) is mainly explained by sectors, at both 1-digit and 5-digit level. Sector market opportunities reflected barriers to market entry which limited substitutability for the services of the professions, some manufacturing and maker-dealing industries. Localisation mainly reflected urban/rural differences, accessibility to railways and to a lesser extent waterways. Differences in firm-level organisation (measured by portfolio diversification and partnerships) were less significant for explaining profit heterogeneity than sector or localisation. Demographic effects such as an entrepreneur's age had little significance. Marshall's insight of convergence to mean industry-sector profitability, with localisation as a secondary influence, is confirmed, but there remain unexplained elements of heterogeneity indicating important roles of entrepreneurial agency.

Item Type: Article
Additional Information: © 2021 Cambridge University Press
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
JEL classification: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L29 - Other
Date Deposited: 01 Mar 2022 15:18
Last Modified: 12 Dec 2022 13:03
URI: http://eprints.lse.ac.uk/id/eprint/113883

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