Entrepreneurial firms competition

Abstract

Many different theories that have attempted to explain why smaller entrepreneurial firms exist. Surprisingly, very little empirical work has tested the obvious questions, such as: Are small firm’s price-takers in highly competitive markets? Who do they compete against? What if they try to raise prices? Does innovation offer niche market protection? Using a large UK data set our key findings are that less than 5% of entrepreneurial firms operate in markets where they effectively have no competition and a quarter of all small firms would lose at least a third of their sales if they raised prices by 10%.