OECD Compendium of Productivity Indicators 2025

7. Productivity in SMEs and large firms

Context and key findings

A large body of evidence documents differences in productivity across firms (Cette, Corde and Lecat, 2018[1]) and (Cunningham et al., 2022[2]). In several countries, a fat tail of low-productivity firms - composed in large part of small firms - coexists with large firms that are highly productive and exposed to international competition. To the extent that large firms can exploit increasing returns to scale, productivity tends to increase with firm size. Moreover, large firms tend to adopt new technologies more readily than small firms, although this is not necessarily the case for new or younger firms. Large firms also have easier access to finance and to foreign markets. The industry in which a firm operates is a further major determinant of its productivity performance.

While new small firms can also spur aggregate productivity growth when they exploit new technologies and stimulate productivity-enhancing changes by incumbents, severe economic downturns may lead to a missing generation of start-ups (OECD, 2023[3]). While this effect is usually marginal in the short term, the absence of these start-ups may affect long-term productivity, as they play a key role in competition, innovation (Kolev et al., 2022[4]), as well as in the diffusion of new technologies and business models (Criscuolo, Gal and Freund, 2024[5]).

Scale-up dynamics significantly influence firm productivity. Firms that scale up through employment tend to become more productive during their high-growth phase, gradually catching up with peers. In contrast, firms that scale via turnover often expand their workforce just before growth, which temporarily reduces productivity, but their productivity improves as employment stabilises during the growth phase (OECD, 2021[6]). Human capital (e.g. workforce skills, management skills) is another key factor that explains differences in productivity across firms (Criscuolo, Gal and Freund, 2024[5]; Criscuolo et al., 2021[7]).

In addition, the presence of highly productive multinational enterprises (MNEs) can also impact national productivity figures. On the one hand, they may create opportunities for local firms to benefit from knowledge spillovers (Javorcik, 2004[8]; Alfaro-Ureña, Manelici and Vasquez, 2022[9]). On the other hand, profit-shifting by MNEs to low-tax jurisdictions can artificially inflate productivity figures for such countries and complicate cross-country comparisons (Bricongne, Delpeuch and Lopez-Forero, 2023[10]).

Key findings

• Large firms generally exhibit higher labour productivity than smaller companies in most OECD countries. Luxembourg stands out as an exception, with very small firms with 1-9 employees surpassing the largest firms in labour productivity. The largest gaps in labour productivity levels in 2023 or for the latest available year – measured as value added per person employed – between large and smaller firms were observed in Ireland and Norway (Figure 7.1). Such a gap in Ireland is mainly due to an over-representation of very large and highly-productive firms – mostly foreign-owned – which benefit from low statutory income tax rates (OECD, 2022[11]). In Norway, the high labour productivity of very large firms was particularly evident in the mining and quarrying sector. This was likely driven by a surge in exploration activities of oil and petroleum over the past few years (OECD, 2024[12]). In Europe, multinationals are also found to be more productive than other firms, with no marked difference between domestic and foreign-owned multinationals (Eurostat, 2025[13]).

• On average across countries, firms with more than 250 employees produce about twice as much output per hour as firms with 10-19 employees. Within each country, large firms also tend to be about 75% more productive than mid-sized firms (50-249 employees), and around one-third more productive than firms with 100-249 employees. These patterns point to substantial productivity differences by firm size, even within national economies.

• In manufacturing, the productivity gap between large and small firms was on average more pronounced than in the business economy as a whole, reflecting returns to scale from capital-intensive production (Figure 7.2). This strong size–productivity link in manufacturing is consistent with previous findings (Berlingieri, Calligaris and Criscuolo, 2018[14]). Among OECD countries for which data is available, manufacturing firms with less than ten employees in Türkiye and Greece had the biggest productivity gap relative to outsized enterprises. In Ireland, the productivity gap of medium-sized with respect to large enterprises was similar to that of small firms, and the biggest among OECD countries. Conversely, the productivity of small and medium-sized enterprises in Japan was the closest to that of large firms, even exceeding it in case of medium-sized firms.

• Compared with manufacturing, differences in labour productivity between firm size classes are less pronounced in business services. Firm size tends not to be the sole determinant of firm’s performance in terms of productivity in business activities (Berlingieri, Calligaris and Criscuolo, 2018[14]). In some OECD countries, smaller firms even outperformed large ones in terms of labour productivity (see Figure 7.3). This is likely attributed to the competitive advantages of small-size firms in these activities compared to their larger counterparts, such as agility, niche focus, specialised expertise, and flexibility (Hallward-Driemeier, Nayyar and Davies, 2022[15]; Marchese et al., 2019[16]). In addition, startups may possess valuable intangible assets – such as R&D or patents – that are highly scalable at limited marginal cost (Haskel and Westlake, 2018[17]). These advantages are likely to enable start-ups and young firms to scale up – meaning increase their turnover – without necessarily sizing up their capital stock or expanding their workforce at the same rate (Audretsch, Kritikos and Schiersch, 2020[18]; Mula, Zybura and Hipp, 2024[19]).

Indicators

Figure 7.1. Labour productivity in SMEs and large firms, business economy

USD per person employed, current prices, 2023 or latest available year

Note: 1-9 corresponds to firms with less than 10 employees, 10-49 corresponds to firms having more than 10 but less than 50 employees, 50-249 corresponds to firms with more than 50 but less than 250 employees, 250+ corresponds to firms with more than 250 employees.

Source: OECD Structural and Demographic Business Statistics (database).

Statlink

Figure 7.2. Labour productivity in SMEs and large firms, manufacturing

Index = 100 for firm size 250+, 2023 or latest available year

Note: 1-9 corresponds to firms with less than 10 employees, 10-49 corresponds to firms having more than 10 but less than 50 employees, 50-249 corresponds to firms with more than 50 but less than 250 employees.

Source: OECD Structural and Demographic Business Statistics (database).

Statlink

Figure 7.3. Labour productivity in SMEs and large firms, business services

Index for firm size 250+, 2023 or latest available year

Note: 1-9 corresponds to firms with less than 10 employees, 10-49 corresponds to firms having more than 10 but less than 50 employees, 50-249 corresponds to firms with more than 50 but less than 250 employees.

Source: OECD Structural and Demographic Business Statistics (database).

Statlink

How to read the indicators

Labour productivity by enterprise size-class is measured as gross value added at current prices per person employed. Labour input is measured as total employment, which includes employees and all other paid or unpaid persons who worked during the reference year. Data on hours worked by all persons employed are typically not available by enterprise size class.

Value added and total employment for different enterprise size classes are sourced from OECD Structural and Demographic Business Statistics (database). They usually do not perfectly align with the corresponding estimates in national accounts. For instance, the latter include adjustments to capture the informal economy. Since labour input is measured as total employment, the cross-country comparability of labour productivity measures by size class may also be affected by differences in the share of part-time employment. In addition, productivity differences in the main aggregate sectors could mask different productivity patterns in more narrowly defined industries.

In this chapter, “business economy” covers mining and quarrying (B), manufacturing (C), electricity, gas, steam and air conditioning supply (D), water supply, sewerage, waste management and remediation activities (E), construction (F) and business services (excluding finance and insurance activities). Business services include wholesale and retail trade, repair of motor vehicles and motorcycles (G); transportation and storage (H); accommodation and food services (I); information and communication services (J); real estate activities (L); and professional, scientific, administrative and support activities (M and N) (letters between brackets correspond to the industry codes in ISIC rev. 4).

Data sources

OECD Structural and Demographic Business Statistics (database), http://dx.doi.org/10.1787/sdbs-data-en.

References

[9] Alfaro-Ureña, A., I. Manelici and J. Vasquez (2022), “The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages”, The Quarterly Journal of Economics, Vol. 137/3, pp. 1495-1552, https://doi.org/10.1093/qje/qjac006.

[18] Audretsch, D., A. Kritikos and A. Schiersch (2020), “Microfirms and Innovation in the Service Sector”, Small Business Economics, Vol. 55, pp. 997-1018.

[14] Berlingieri, G., S. Calligaris and C. Criscuolo (2018), “The Productivity-Wage Premium: Does Size Still Matter in a Service Economy?”, AEA Papers and Proceedings.

[10] Bricongne, J., S. Delpeuch and M. Lopez-Forero (2023), “Productivity slowdown and tax havens: Where is measured value creation?”, Journal of International Economics, Vol. 143, https://doi.org/10.1016/j.jinteco.2023.103757.

[1] Cette, G., S. Corde and R. Lecat (2018), “Firm-level productivity dispersion and convergence”, Economics Letters, Vol. 166, pp. 76-78, https://doi.org/10.1016/j.econlet.2018.02.018.

[5] Criscuolo, C., P. Gal and L. Freund (2024), “Human capital at work: Five facts about the role of skills for firm productivity, growth, and wage inequality”, OECD Productivity Working Papers, No. 36, OECD Publishing, Paris, https://doi.org/10.1787/486c0289-en.

[7] Criscuolo, C. et al. (2021), “The human side of productivity: Uncovering the role of skills and diversity for firm productivity”, OECD Productivity Working Papers, No. 29, OECD Publishing, Paris, https://doi.org/10.1787/5f391ba9-en.

[2] Cunningham, C. et al. (2022), “Dispersion in Dispersion: Measuring Establishment‐Level Differences in Productivity”, Review of Income and Wealth, Vol. 69/4, pp. 999-1032, https://doi.org/10.1111/roiw.12616.

[13] Eurostat (2025), Economic indicators of enterprises belonging to multinational enterprise groups, Eurostat.

[15] Hallward-Driemeier, M., G. Nayyar and E. Davies (2022), For services firms, small can be beautiful, VoxEU.org.

[17] Haskel, J. and S. Westlake (2018), Capitalism without Capital: The Rise of the Intangible Economy, Princeton University Press, https://doi.org/10.2307/j.ctvc77hhj.

[8] Javorcik, B. (2004), “Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages”, American Economic Review, Vol. 94/3, pp. 605-627, https://doi.org/10.1257/0002828041464605.

[4] Kolev, J. et al. (2022), Of Academics and Creative Destruction: Startup Advantage in the Process of Innovation, National Bureau of Economic Research, https://doi.org/10.3386/w30362.

[16] Marchese, M. et al. (2019), “Enhancing SME productivity: Policy highlights on the role of managerial skills, workforce skills and business linkages”, OECD SME and Entrepreneurship Papers, No. 16, OECD Publishing, Paris, https://doi.org/10.1787/825bd8a8-en.

[19] Mula, C., N. Zybura and T. Hipp (2024), “From digitalized start-up to scale-up: Opening the black box of scaling in digitalized firms towards a scaling process framework”, Technological Forecasting and Social Change.

[12] OECD (2024), OECD Economic Surveys: Norway 2024, OECD Publishing, Paris, https://doi.org/10.1787/cb13475f-en.

[3] OECD (2023), OECD SME and Entrepreneurship Outlook 2023, OECD Publishing, Paris, https://doi.org/10.1787/342b8564-en.

[11] OECD (2022), OECD Economic Surveys: Ireland 2022, OECD Publishing, https://doi.org/10.1787/46a6ea85-en.

[6] OECD (2021), Understanding Firm Growth: Helping SMEs Scale Up, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/fc60b04c-en.