Small Firms' Seedbed Role and the Concept of Turbulence

Abstract

AN important role of independent small firms is often asserted to be to function as the 'seedbed' for new enterprises capable of challenging established businesses. The authors bring original data to bear on this, suggesting a workable definition of what constitutes a seedbed; measuring its industrial incidence; and defining the part played by independent firms in it. The study reveals substantial variation in the level of such activity among manufacturing industries. It is shown that seedbed activity is essentially innovative (the precursor of new industries) rather than a source of increased rivalry within existing industries. Conclusions are drawn about small firms policy, in particular that government aid for small business should be aimed more at reducing death rates among small firms.