Chapter 1: Introduction

The purpose of this book is to introduce the economic research on enterprises of small and medium scale. This has been a topic of active economic research for about a generation. In earlier economics, there was little or no special study of small business, probably because economists thought of small business as the norm. Agricultural enterprises, which are typically small, were the special study of agricultural economics. Otherwise, it seemed that it was “big businesses” that needed specialized study—monopoly and oligopoly. Much was learned about these enterprises in the specialized studies of industrial organization and public utilities. These studies showed how the abstract idea of “the firm” in economic theory could give way to a more detailed, empirical understanding of business organizations. In the late 1980s, some economists began to study small business in a similar way. The journal Small Business Economics began to be published in 1988. In the quarter century that has followed, a great deal has been learned, some of it built on work that had already been done before 1988 and proved particularly valuable for the study of small- and medium-scale businesses, and much of it novel. The purpose of this book is to convey the results of this research in a form accessible to undergraduate students in economics and others with some preparation in economics. The focus will be on non-agricultural small and medium enterprises (SMEs)…