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The Dynamics of the Growth of Firms: Evidence from the Services Sector

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  • Blandina Oliveira

    ()
    (ESTG, Instituto Politécnico de Leiria)

  • Adelino Fortunato

    ()
    (GEMF and Faculdade de Economia, Universidade de Coimbra)

Abstract

Using a dynamic panel data model with serial correlation in the error term, the purpose of this paper is to examine if Gibrat’s law can be rejected for the services sector as it has been for manufacturing. The aim of this paper is also to improve the understanding of the empirical determinants of firm growth by extending the literature to include a new variable related to foreign participation. In addition, and based on recent developments in the growth of firms, our analysis also includes the role of the financial structure. The sample used is an unbalanced panel data set that includes all size classes, including the smallest surviving firms, from the Portuguese service sector over the period from 1995 to 2001. Applying the GMM-system and pooled OLS estimators our findings suggest that Gibrat’s law is rejected for services firms. In addition, the results also indicate that firm growth is mainly explained by firm size and age. These results have significant policy implications.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2005-04.

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Length: 36 pages
Date of creation: 2005
Date of revision:
Publication status: Published in Empirica 35(3):293-312, 2008
Handle: RePEc:gmf:wpaper:2005-04

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Keywords: Firm growth; Panel data; GMM estimators; Services;

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Citations

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Cited by:
  1. Daunfeldt, Sven-Olov & Halvarsson, Daniel, 2012. "Are high-growth firms one-hit wonders? Evidence from Sweden," HUI Working Papers, HUI Research 73, HUI Research.
  2. Ioannis Giotopoulos & Georgios Fotopoulos, 2010. "Intra-Industry Growth Dynamics in the Greek Services Sector: Firm-Level Estimates for ICT-Producing, ICT-Using, and Non-ICT Industries," Review of Industrial Organization, Springer, Springer, vol. 36(1), pages 59-74, February.
  3. Horácio Faustino & Nuno Carlos Leitão, 2005. "The Intra Industry Trade between Portugal European Union, Portugal Spain, Portugal-France, Portugal Germany, Portugal-Ireland, Portugal-Greece and Portugal-Netherlands - a Dynamic Panel Data Analysis ," ERSA conference papers ersa05p23, European Regional Science Association.
  4. Molinari, Massimo, 2013. "Joint analysis of the non-linear debt–growth nexus and cash-flow sensitivity: New evidence from Italy," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 24(C), pages 34-44.
  5. Jan Bentzen & Erik Madsen & Valdemar Smith, 2012. "Do firms’ growth rates depend on firm size?," Small Business Economics, Springer, Springer, vol. 39(4), pages 937-947, November.
  6. Gavin Reid & Zhibin Xu, 2012. "Generalising Gibrat: using Chinese evidence founded on fieldwork," Small Business Economics, Springer, Springer, vol. 39(4), pages 1017-1028, November.

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