Explaining the distribution of firm growth rates
AbstractEmpirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates. We present clear-cut evidence on this topic using disaggregated data. We explain the observed regularities proposing a model in which firms' ability to take up new business opportunities increases with the number of opportunities already exploited. A theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity. Moreover, using simulations, we show that even in a small industry the agreement with asymptotic results is almost complete.
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Bibliographic InfoArticle provided by RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 37 (2006)
Issue (Month): 2 (06)
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