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This collection of essays is based on the 1994 F. de Vries lectures held at the Erasmus University, Rotterdam, March 1994. The authors in this volume discuss the changing role of small firms in the modern economy from different angles. Bo Carlsson pays attention to the introduction of flexible automation. He explains that this change of technology has resulted in a decrease of the size of firms. Zoltan Acs argues that small firms play an important role in the experimental phase of innovations in product and process. Roy Thurik mentions in his contribution a series of trade-offs between favourable and negative effects of economies of scale and scope. Most of his arguments are referring to the sphere of distribution: transport costs and characteristics of consumer preferences. The authors provide statistical information about production activities of large and small firms. The evidence points without exception in one and the same direction; they agree on the conclusion that in recent years the small firm has become more important as employer and producer. Or to say it the other way round: in most industrialized countries the position of the large firms has been weakened.