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Corporate performances and market selection: some comparative evidence

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  • Giulio Bottazzi
  • Giovanni Dosi
  • Nadia Jacoby
  • Angelo Secchi
  • Federico Tamagni

Abstract

Diverse theories of industry dynamics predict heterogeneity in production efficiency to be the driver of firms' growth, survival, and industrial change, either through a direct link between efficiency and growth, or through an indirect effect via profitabilities, as more productive firms can enjoy higher profit margins which, under imperfect capital markets, allow them to invest and grow more. Does the empirical evidence bear out such predictions? This article explores the dynamics of selection and reallocation through an investigation of the relations linking productivity, profitability and growth at the firm level. Exploiting large panels of Italian and French industrial firms, we find that heterogeneity in efficiencies primarily yields persistent profitability differentials, whereas the relationships of corporate growth with either productivity or profitability appear much weaker, if at all existent. This suggests that selection forces are much less strong than usually assumed. The results robustly apply across different industrial sectors and across the two countries. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Industrial and Corporate Change.

Volume (Year): 19 (2010)
Issue (Month): 6 (December)
Pages: 1953-1996

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Handle: RePEc:oup:indcch:v:19:y:2010:i:6:p:1953-1996

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Citations

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Cited by:
  1. Marco Grazzi, 2012. "Export and Firm Performance: Evidence on Productivity and Profitability of Italian Companies," Journal of Industry, Competition and Trade, Springer, Springer, vol. 12(4), pages 413-444, December.
  2. John Baldwin & Amélie Lafrance, 2014. "Firm Turnover and Productivity Growth in Canadian Manufacturing and Services Industries, 2000 to 2007," Journal of Industry, Competition and Trade, Springer, Springer, vol. 14(2), pages 173-205, June.
  3. Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2012. "Age and firm growth. Evidence from three European countries," Working Papers, Department of Applied Economics II, Universidad de Valencia 1217, Department of Applied Economics II, Universidad de Valencia.
  4. Giovanni Dosi & Daniele Moschella & Emanuele Pugliese & Federico Tamagni, 2013. "Productivity, market selection and corporate growth: comparative evidence across US and Europe," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  5. Nanditha Mathew, 2012. "Drivers of Firm Growth: Micro-evidence from Indian Manufacturing," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2012/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  6. Giulio Bottazzi & Marco Grazzi, 2013. "Dynamics of productivity and cost of labor in Italian Manufacturing firms," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  7. Giovanni Dosi, 2012. "Economic Coordination and Dynamics: Some Elements of an Alternative "Evolutionary" Paradigm," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2012/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  8. Giovanni Dosi & Marco Grazzi & Chiara Tomasi & Alessandro Zeli, 2012. "Turbulence underneath the big calm? The micro-evidence behind Italian productivity dynamics," Small Business Economics, Springer, Springer, vol. 39(4), pages 1043-1067, November.
  9. Lee, Sanghoon, 2014. "The relationship between growth and profit: evidence from firm-level panel data," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 28(C), pages 1-11.
  10. Cédric Durand & Antonia Lòpez-Villavicencio, 2011. "On the link between distribution's margins and exchange rates: the role of globalization," CEPN Working Papers, HAL hal-00611862, HAL.
  11. Stefano Bianchini & Giulio Bottazzi & Federico Tamagni, 2014. "What does (or does not) determine persistent corporate high-growth ?," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2014/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  12. repec:hal:wpaper:hal-00611862 is not listed on IDEAS
  13. Altomonte, Carlo & Nicolini, Marcella, 2012. "Economic integration and the dynamics of firms’ competitive behavior," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 23(4), pages 383-402.
  14. Giovanni Dosi & Marco Grazzi & Chiara Tomasi & Alessandro Zeli, 2010. "Turbulence underneath the big calm? Exploring the micro-evidence behind the flat trend of manufacturing productivity in Italy," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2010/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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