Growth of Firms in Manufacturing Sector

This article focuses on growth, one of the important aspects of firm behaviour, in Iran’s manufacturing sector with regard to large firms and small and medium enterprises (SMEs). It attempts to analyze the factors that have had an effect on the firms’ growth in this period and tries to show the differences between SMEs and large firms in pattern of growth by using generalized method of moment (GMM) estimator for 137 sub-sectors (4-digit International Standard of Industrial Classification of All Economic Activities [ISIC] code) during 1995–2002. The evidences suggest that some elements such as growth in previous year, minimum efficient scale, total factor productivity, export, capital–labour ratio, import, technology usage, sunk cost and age have effect on firms’ growth in both SMEs and large firms. In Iran manufacturing sector, some specific variables such as oil and ownership are important for growth of firms. Moreover, the result implies that the pattern of growth for SMEs and large firms is different.