Dynamics of Industrial Location

Backbone Firms

Chapter 10 focuses on so-called 'backbone firms'. In this chapter, these firms are generally classified as 'medium-sized firms' (MSFs) and are interpreted as a distinct segment of firms with structural characteristics and behavioural patterns that distinguish them from 'small' firms and from 'giant' multinational firms. Backbone firms are a highly innovative groups of firms that typically pursue highly focused corporate strategies. In practice, as the examples in chapter 10 reveal, these firms are often 'large' and often international in scope. Moreover, as chapter 10 notes, the literature has associated medium-sized firms with small firms in a category labeled 'small and medium-sized firms (SMEs). Thus, it may be better to classify backbone firms as 'large firms' (LFs), rather than medium-sized firms, to emphasize the distinction between SMEs and giants.

It should be re-emphasized that the distinctions between SMEs, LFs and giant MNCs is not simply about size. Rather, each of these categories groups together firms that share common organizational and behavioural traits that to some extent, but by means completely, correspond to variations in size.

An important implication of recognizing the LF segment is that the dual model of business segmentation, which is based on the 'polar' distinctions of tiny firms and giants, needs to be replaced with a 'triad' model of business segmentation. Such a triad model helps provide a better understanding of why both business segmentation and a size distribution of firms are realities of modern industrial economies. A triad model that specifically includes backbone firms, also recognizes that the boundaries between segments of firms are not absolute. That is, these boundaries are permeable to some degree as firms can enter and exit different segments.

You might wish to note two recent papers that seek to explain the differences between SMEs, LFs and giant MNCs while outlining the nature and implications of the triad model for business segmentation and local development. They are:

J. Patchell, R. Hayter and K. Rees 1999 Innovation and local development: the neglected role of large firms. In E. J. Malecki and P. Oinas (eds.) Making Connections: Technological Learning and Regional Economic Change, Aldershot: Ashgate, pp. 109-144.

R. Hayter, J. Patchell, and K. Rees 1999 Business Segmentation and Location Revisited: The Terra Incognita of Large Firms, Regional Studies (forthcoming).