Introduction

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Introduction: A revised introduction to "Small and Big Business"

Author:: Steindl, Josef

Scope:: Typoskript, 20 Blätter

Year of publication:: 1972

Source material date:: [04.1972]

Language:: English

Description:: Twenty five years after the first publication of this little book I do not find myself in full agreement with everything it contains... My chief amendment concerns an error in interpreting the statistics of U.S. corporations which show that fixed capital in relation to turnover increases with the size of the firm (chapter III, Table IX, p.24). (Auszug S. 1)

Note:: Beim Typoskript handelt es sich um eine neu verfasste Einleitung zum Buch "Small and Big Business" (1945) vermutlich zwecks der italienischen, spanischen oder portugiesischen Ausgabe des Buches.

Related work:: Steindl, Josef (Hrsg.): Economic Papers 1941-88. London: Macmillan, 1990 Steindl, Josef: Small and Big Business. Economic Problems of the Size of Firms. Oxford: Blackwell, 1945

Topic:: Firm and market structure

JEL Classification:: D24 [Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity] D43 [Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection] L11 [Production, Pricing, and Market Structure, Size Distribution of Firms]

Shelfmark:: S/M.3.7

Access:: Free access

4. Thus the possibilities of increasing the capital-coefficient without reducing the profit rate depend on the size of the ruling profit margin, in other words, on the distribution of income. (It should immediately be noted that this ruling profit margin will be different for different size classes of firms). We now turn to the relation of capital intensity and productivity. It can be shown that the growth rate of the capital-output ratio equals the growth rate of capital per man minus the growth rate of output per man. On p. 33 I used somewhat different concepts: Instead of capital per man I used the capital-cost ratio, and instead of output per man the sales-cost ratio. If we take the wage as constant, the analysis of p. 33 will come to the same as the present analysis, but it should be noted that in fact real wages can differ between firms (e.g., of different sizes), and especially over time. In the light of the engineering data, it seems that the growth in pro ductivity will outweigh the growth of capital intensity over a wide range of output: In consequence the capital-output ratio will decline over this range. This is indeed apparently the course of much of the technical progress. It might be that beyond a point the relation will be reversed, the capital growth will out weigh the productivity growth, so that the capital-output ratio will increase; there will be diminishing (marginal) returns to capital which on p. 33 I still regarded as plausible. Today I doubt whether the range of diminishing returns of capital-intensification is actually entered in the ordinary course of events; such techniques are perhaps not developed at all, and diminishing returns to capital-intensification exist only theoretically beyond the point at which actually developed methods end. This point is, however, shifted further on in the course of technical progress. This avoidance of the range of increasing capital-output ratios may result from the above stated influence of high profit margins. What can be the relevance of this analysis to the question of scale? In Chapter III I used it to explain why the highest size groups of corporations show signs of diminishing profit rate, for which I could find no technical reasons (diseconomies of scale I assumed to be unimportant). But if the capital coefficient does not rise with increasing scale, the whole argument falls to the ground. There is an even more direct objection against it: Why, one might ask, do the big concerns apply such methods of production, if they yield them a smaller profit rate than less capital-using methods would? In fact, the analysis of Chapter III is much more suitable for explaining why the large firms do not

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