7.7.1—Firm size

There is no single best measure of firm size. Common measures include revenue, value of assets, number of employees, output and market share.

Different measures answer different questions: employment captures labour use, sales capture turnover, assets capture capacity, and market share captures position in a defined product market. Compare firms only when the measure and market boundary match.

A capital-intensive utility may have high assets but relatively few employees; a labour-intensive retailer may have the reverse. Calling one “larger” depends on the purpose of the comparison.

A high market share is not automatically high revenue or high profit, and a firm’s size in one market may be small in another.