Taymaz, Erol 

Earlier versions of this paper were presented at the 9th Annual Conference of Economic Research Forum (ERF), Al-Sharjah, UAE, October 26-28, 2002, and the workshop on The Post-entry Performance of Firms: Technology, Growth, and Survival, Bologna, November 22-23, 2002.

Small and medium-sized establishments (SMEs) account for a large proportion of industrial employment and production in almost all countries. Moreover, the recent literature emphasizes the role SMEs play in nurturing entrepreneurship and generating new products and processes. Although SMEs could be a source of new ideas and innovations, there are substantial productivity differences between small and large establishments. In this paper, we analyze three sources of productivity differentials: technical efficiency, returns to scale, and technical change. Our analysis on the creation, survival, and growth of new establishments in Turkish manufacturing industries in the period 1987-97 shows that all these three factors play a very important role in determining the survival probability and growth prospects of new establishments.

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