Price impacts of small-firm entry in US manufacturing

There has been little prior research into whether there are differing effects of entry by size of entrants. This study examines the annual data for the decade of the 1990s, and virtually all three-digit SIC industries; entry and expansion by firms in different employment size categories are examined and the econometric analysis seeks to find differential impacts on producer prices. The results presented here, although limited by data availability, confirm previous work suggesting an important market-disciplining role of small-firm entry. Industries experiencing greater rates of small-firm entry show smaller price increases, after controlling for cost, demand, and exchange rate pressures. © 2010 EEA.