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Are Firm Growth Rates Random? Analysing Pattern and Dependencies

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Author Info
Toke Reichsteicn
Michael Dahl

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Abstract

Using Danish firm data covering almost 9000 observations, we find significant proof that firm growth cannot be considered as a simple Gibrat growth process. Key variables, such as size, age, geographical location and industry structure are tested against firm growth rates in turnover and employment. Besides running the regressions on all observations, we also consider and find highly interesting patterns in an industry context. Thus, we conclude that firm growth cannot be considered idiosyncratic. Firm growth is highly dependent on industry and geography.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 18 (2004)
Issue (Month): 2 (April)
Pages: 225-246
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Handle: RePEc:taf:irapec:v:18:y:2004:i:2:p:225-246

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Related research
Keywords: Firm growth; geographical location; industrial differences;

References listed on IDEAS
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  1. Sawyer, Malcolm C, 1971. "Concentration in British Manufacturing Industry," Oxford Economic Papers, Oxford University Press, vol. 23(3), pages 352-83, November. [Downloadable!] (restricted)
  2. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-74, August. [Downloadable!] (restricted)
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  3. Krugman, Paul, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-74, Spring. [Downloadable!] (restricted)
  4. Geroski, Paul A, 1999. "The Growth of Firms in Theory and in Practice," CEPR Discussion Papers 2092, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Blackwell Publishing, vol. 35(4), pages 583-606, June. [Downloadable!] (restricted)
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  6. Lawrence J. White, 2002. "Trends in Aggregate Concentration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 137-160, Fall. [Downloadable!] (restricted)
  7. Zoltan J. Acs & David B. Audretsch, 1988. "Testing the Schumpeterian Hypothesis," Eastern Economic Journal, Eastern Economic Association, vol. 14(2), pages 129-140, Apr-Jun. [Downloadable!]
  8. Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers 86-33, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  9. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
  10. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September. [Downloadable!] (restricted)
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  11. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  12. Malerba, Franco & Orsenigo, Luigi, 1997. "Technological Regimes and Sectoral Patterns of Innovative Activities," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 83-117.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Goddard & David McMillan & John O. S. Wilson, 2006. "Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run," Applied Economics, Taylor and Francis Journals, vol. 38(3), pages 267-278, February. [Downloadable!] (restricted)
  2. Alexander Coad & Jagannadha Pawan Tamvada, 2008. "The Growth and Decline of Small firms In Developing Countries," Papers on Economics and Evolution 2008-08, Max Planck Institute of Economics, Evolutionary Economics Group. [Downloadable!]
  3. Anne Otto & Dirk Fornahl, 2009. "Cohesion Policy:Methodology And Indicators Towards Common Approach," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 3(1), pages 1-35, JUNE. [Downloadable!]
  4. Otto, Anne & Fornahl, Dirk, 2008. "Long-term growth determinants of young businesses in Germany : effects of regional concentration and specialisation," IAB Discussion Paper 200813, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
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