Analysis of the relationship between enterprise size and economic growth

張登月

The continuous growth of Chinese economy over the 40 years after the opening up policy makes historical progress in that China turns from a low-income country to one with medium level of income. With the slowdown in economic growth and industrial restructuring and upgrading， how to tap the potential of economic growth and steady growth has become a hot topic. From the perspective of GDP accounting， the economic growth mainly comes from the increase of enterprise added value， which has two main sources， one is the added value brought by newly established enterprises， and the other is the expanding of industry foundation output.

Intuitively， the change of enterprise scale is closely related to economic growth， and the growth of economy is generally dependent on the expansion of enterprise output scale， but it is not a linear relationship. It is thought that the expansion of new enterprises and small enterprises， large enterprises become larger and so on， will make the scale of enterprise output. First of all， small and medium-sized enterprises have the advantages of active market and increasing employment， and they are also more innovative compared to large enterprises. In the process of moving from low-income to middle-income， the emergence of many private SMEs in China is of great significance. In the past decade， with the gradual industrial reshuffle and production concentration and upgrading， some small and medium-sized enterprises have emerged. The scales of production and operation of enterprises have been continuously expanded， and the influence of competitiveness has been continuously improved.

Besides， economic growth does not have to rely on large-scale enterprises solely， and raising the level of specialization is also one of the important factors for enterprises to improve economies of scale. Some researches indicate that most economies have fallen into the so-called“middle income trap” after a short period of rapid growth， because after entering middle income， market demand vacancies are reduced， which restricts the production of highly industrialized products. And that is why specialization is necessary. Moreover， economic growth is regarded as a macro indicator， while research on economic growth is considered as the core content of macroeconomics， but the micro-foundation of economic growth is the enterprise， that is， the foundation of market power comes from the size of a single enterprise. Therefore， even though the Internet and technology develop rapidly， the significance of a single enterprise will not decrease.

Compared to small businesses， whether larger companies can promote the growth of an economy， is related to many factors such as price， product quality， service and specialization. No matter when， in the early stages of economic development or after the early stages， the effect of large enterprises remains crucial. It is generally known that the economic competitions between countries are mainly concentrated in large enterprises， and whether or not there are some enterprises of a certain scale is a key indicator for measuring the competitiveness of a country， and it is also an important guarantee for the sustained growth of a country's economic strength.

However， due to the increasing income and the inseparability of production， industrialization must be promoted by a group of enterprises of the most appropriate scale， and the scale of these enterprises should be large enough. In fact， economics lacks a convincing and universal theory of firm size. And the representative is the homogeneity of the "Cost Theory"， the shortcoming is that the cost curve of all enterprises is treated as the same one. Meanwhile， the scale of management research enterprises is often based on factual statements， case studies， and experience summaries， and no general theory has been proposed yet. In fact， there is no such thing as "best scale." At the same time， studies have shown that the diversity of enterprise size comes from its heterogeneity.

In conclusion， enterprises with an investment and growth period pay more attention to expansion， while maturity and decline enterprises focus more on improving their competitiveness. In addition， the continuous expansion of the scale of enterprises and the growth of enterprises quantity not only will help to promote the growth of enterprise output， but to bring about the rapid growth of China's economy.