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Testing "Gibrat's Law" for Young Firms--Empirical Results for West Germany

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  • Almus, Matthias
  • Nerlinger, Eric A
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    Abstract

    The present paper deals with the question whether "Gibrat's law" is applicable to firms founded between 1989 and 1994 within the West German manufacturing sector or not. We find that firm size follows approximately a log normal distribution. Within the context of the econometric analyses conducted in the present study, firms are subdivided into young firms belonging to technology intensive and non-technology intensive branches as well as in different size classes. A method introduced in Chesher (1979) is used to explore "Gibrat's law" in order to examine the influence of firm size on growth. Using data from the ZEW-Foundation Panel (West), "Gibrat's law" is rejected for the group of young firms belonging to technology intensive branches as well as for those operating in non-technology intensive branches in all periods examined but no significant differences between both firm groups can be observed. This confirms the results of a number of empirical studies over the last few years, indicating that smaller firms have larger growth potential than larger ones. Copyright 2000 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Small Business Economics.

    Volume (Year): 15 (2000)
    Issue (Month): 1 (August)
    Pages: 1-12

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    Handle: RePEc:kap:sbusec:v:15:y:2000:i:1:p:1-12

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    Web page: http://www.springerlink.com/link.asp?id=100338

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    Cited by:
    1. Mundt, Philipp & Milakovic, Mishael & Alfarano, Simone, 2014. "Gibrat's law redux: Think profitability instead of growth," BERG Working Paper Series 92, Bamberg University, Bamberg Economic Research Group.
    2. Blandina Oliveira & Adelino Fortunato, 2003. "Testing Gibrat’s Law: Empirical Evidence from a Panel of Portuguese Manufacturing Firms," GEMF Working Papers 2003-07, GEMF - Faculdade de Economia, Universidade de Coimbra.
    3. Hessels, Jolanda & Parker, Simon C., 2013. "Constraints, internationalization and growth: A cross-country analysis of European SMEs," Journal of World Business, Elsevier, vol. 48(1), pages 137-148.
    4. F. Lotti & E. Santarelli & M. Vivarelli, 2003. "Gibrat's Law and Market Selection in the Radio, TV & Telecommunications Equipment Industry," Working Papers 478, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Bade, Franz-Josef & Alm, Bastian, 2010. "Endbericht zum Gutachten Evaluierung der Gemeinschaftsaufgabe "Verbesserung der regionalen Wirtschaftsstruktur" (GRW) durch einzelbetriebliche Erfolgskontrolle für den Förderzeitraum 1999-20," EconStor Research Reports 93487, ZBW - German National Library of Economics.
    6. David B. Audretsch & Max Keilbach, 2006. "Entrepreneurship, Growth and Restructuring," Papers on Entrepreneurship, Growth and Public Policy, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group 2006-13, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    7. Blandina Oliveira & Adelino Fortunato, 2005. "Firm Growth and Persistence of Chance: Evidence from Portuguese Microdata," GEMF Working Papers 2005-10, GEMF - Faculdade de Economia, Universidade de Coimbra.
    8. repec:hal:journl:halshs-00155762 is not listed on IDEAS
    9. Saras Sarasvathy & Anil Menon & Graciela Kuechle, 2013. "Failing firms and successful entrepreneurs: serial entrepreneurship as a temporal portfolio," Small Business Economics, Springer, Springer, vol. 40(2), pages 417-434, February.
    10. Gavin Reid & Zhibin Xu, 2012. "Generalising Gibrat: using Chinese evidence founded on fieldwork," Small Business Economics, Springer, Springer, vol. 39(4), pages 1017-1028, November.
    11. Francesca Lotti & Marco Vivarelli & Enrico Santarelli, 2004. "Gibrat's Law and Market Selection," Papers on Entrepreneurship, Growth and Public Policy, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group 2004-28, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    12. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2002. "The Post-entry Size Adjustment of New small Firms," LEM Papers Series 2002/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    13. Daria Ciriaci & Pietro Moncada-Paternò-Castello & Peter Voigt, 2013. "Innovation and Job Creation: A sustainable relation?," JRC-IPTS Working Papers on Corporate R&D and Innovation 2013-01, Institute of Prospective Technological Studies, Joint Research Centre.

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