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The Time-Series Pattern Of Firm Growth In Two Industries

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  • Kenneth R Troske

Abstract

Using a unique firm-level longitudinal data set that covers both the manufacturing and finance, insurance and real estate (FIRE) industries, this paper examines the time-series pattern of firm growth both immediately after entry and immediately prior to exit, and compares these patterns across the two industries. While previous research has examined the post-entry time-series behavior of firms, this research has focused exclusively on manufacturing firms. Examining the behavior of nonmanufacturing firms is important for two reasons. First, since the relative importance of the manufacturing industry has been declining recently, the behavior of manufacturing firms may be much different than the behavior of firms in an expanding industry, such as FIRE. Thus, comparing the growth of firms in a nonmanufacturing industry, with the growth of manufacturing firms provides more general knowledge about firm behavior. Second, since any good theory of firm dynamics should explain cross-industry differences in firm behavior, cross-industry differences in behavior must be documented before models of this type can be developed. The main finding of this paper are: (1) relative to FIRE firms, manufacturing firms experience more periods of above average growth immediately after entry; (2) relative to FIRE firms, manufacturing firms experience more periods of below average growth immediately prior to exit; and (3) relative to the growth of manufacturing firms, the growth of the typical FIRE firm is much more responsive to transitory shocks.

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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 92-10.

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Date of creation: Sep 1992
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Handle: RePEc:cen:wpaper:92-10

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Keywords: CES; economic; research; micro; data; microdata; chief; economist;

References

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  1. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  2. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
  3. 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.
  4. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  5. Ariel Pakes & Richard Ericson, 1989. "Empirical Implications of Alternative Models of Firm Dynamics," NBER Working Papers 2893, National Bureau of Economic Research, Inc.
  6. Bronwyn H. Hall, 1988. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
  7. 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.
  8. Hause, John C & Du Rietz, Gunnar, 1984. "Entry, Industry Growth, and the Microdynamics of Industry Supply," Journal of Political Economy, University of Chicago Press, vol. 92(4), pages 733-57, August.
  9. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-94, April.
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Citations

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Cited by:
  1. Alfred R Nucci, 1996. "Business Failure In The 1992 Establishment Universe Sources Of Population Heterogeneity," Working Papers 96-13, Center for Economic Studies, U.S. Census Bureau.
  2. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau.
  3. Nathan Musick, 1998. "Heroic Plants: Persistently Rapid Job Creators in the Longitudinal Research Database - Their Distinguishing Characteristics and Contribution to Employment Growth," Industrial Organization 9811001, EconWPA.
  4. Das, Sanghamitra, 1995. "Size, age and firm growth in an infant industry: The computer hardware industry in India," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 111-126, March.
  5. Robert H Mcguckin, 1993. "The Importance of Establishment Data in Economic Research," Working Papers 93-10, Center for Economic Studies, U.S. Census Bureau.
  6. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 523-542, December.

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