Analysis of small and medium business: Constructing production functions with estimating effective funds

Abstract

Independent self-organizing small and medium-sized entrepreneurship (SMB) is usually considered to be the most important sector of the modern economy, evolving in according to market conditions and stimulating the economy to progress. But in recent years, works have appeared that criticize the defining of this economy sector as the “locomotive” of the entire market economy. Arguments for different points of view are often based on verbal judgment and comparisons between countries, despite significant differences in the definition of small (SB) and medium (MB) businesses across countries. In this paper, for comparative analysis of industrial segments of the sectors of SB, MB, and large enterprises (LE), we suggest the method for assessing the “effective funds” (EF) of production systems and constructing their production functions (PF). The concept EF is understood as part of the book-value of production funds that actually participate in the output. This indicator is not directly measurable, but it can be estimated based on data of production investment, the number of employees and the total output of enterprises of the studied system when constructing “capital” PF. The initial version of the method was proposed by us in 2012, and here a next modification is given, taking into account the specifics of the SMB reflection by Rosstat. The method is demonstrated on statistical data for the industrial segments of the SB, MB and LE sectors of the Russian economy.