Significant Feedbacks in Firm Growth and Market Structure
AbstractThere are some markets where the growth of firms are held to be subject to diminishing returns, or negative feedbacks; and there are other markets where firm growth is believed to be subject to increasing returns, or positive feedbacks. A long run tendency towards monopoly might be expected in this latter market type, as opposed to a tendency towards relative equality of size shares in the former. It would be useful to draw inferences about the nature of the feedback process from observed market shares and concentration. We motivate and develop a test for feedbacks in firm growth under the null hypothesis that there are none. We use the equivalence between an urn model of the no-feedback process and the asymptotic distribution of sums of ordered intervals in the random division of the unit interval. In the empirical application for the United States, we find that most markets are subject to significant positive feedbacks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp270.
Date of creation: Sep 2003
Date of revision:
Contact details of provider:
Web page: http://www.cbr.cam.ac.uk/
Firm growth; urn models; feedback process; size distribution; concentration ratio;
Find related papers by JEL classification:
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-10-20 (All new papers)
- NEP-COM-2003-10-20 (Industrial Competition)
- NEP-ENT-2003-10-20 (Entrepreneurship)
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.:
- D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004.
"Gibrat's Law: Are the Services Different?,"
Review of Industrial Organization,
Springer, vol. 24(3), pages 301-324, 05.
- Audretsch, D.B. & Klomp, L. & Thurik, A.R., 2002. "Gibrat's Law: are the services different?," Research Paper ERS-2002-04-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
- Roy Thurik & Enrico Santarelli & David Audretsch & Luuk Klomp, 2002. "Gibrat's Law: Are the Services Different?," Scales Research Reports H200201, EIM Business and Policy Research.
- Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
- McCloughan, Patrick, 1995. "Simulation of Concentration Development from Modified Gibrat Growth-Entry-Exit Processes," Journal of Industrial Economics, Wiley Blackwell, vol. 43(4), pages 405-33, December.
- Sleuwaegen, Leo E & Dehandschutter, Wim V, 1986. "The Critical Choice between the Concentration Ratio and the H-Index in Assessing Industry Performance," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 193-208, December.
- Parker, S. C., 1991. "Significantly concentrated markets : Theory and evidence for the U.K," International Journal of Industrial Organization, Elsevier, vol. 9(4), pages 585-590, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).
If references are entirely missing, you can add them using this form.