SMEs, Institutions, and Performance

This chapter addresses at the outset the topic of SMEs and economic development from an institutions perspective. The authors argue that the transaction cost theory is not helpful towards understanding the role that institutions play for SME performance for several reasons. Instead, they argue for combining the resource-based theory with an institutions-based approach towards constructing a more practical and empirical oriented analytical framework. After the preliminary discussion and introduction to the different theories used, the authors then take a focus on the analytical framework used to study the relationship between the institution of competition, firm performance, and firm size distributions. This chapter studies the relationship between competition and firm size, whereas subsequent research could also involve the inclusion of other measures of institutions and firm performance.