ABSTRACT
The debate on size distribution of enterprises draws heavily from the contesting paths of growth and development. The argument runs as follows. Larger scale primarily relates to higher labor productivity and hence higher efficiency wages to labor, that in a way increases the mass market as well as demand for modern goods. The scale advantages flow from several aspects, starting from those linked to marketing and managerial gains, to those related to technology and innovation. In a sense the principal arguments in favor of ‘small’ are the generation of employment and efficient use of capital in a labor surplus or capital scarce economy. In the recent past, literature on flexible specialization and post-Fordist structures have discussed multitasking machines where scale advantages can be derived at a much lower fixed cost and hence the benefits of large structures are reduced. To add to this is the issue of increasing knowledge inputs in production, shrinking product life cycles, demand for customized goods and so on. However this narrative does not fit well with the old growth theory that assumes that the accumulation of physical capital is the only source of growth. The preponderance and expansion of small enterprises and a relatively thin middle segment in India, however, might not always account for the assumed changes in technology and demand pattern, rather they could be a simple reflection of the structural problems of underdevelopment.
