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Firm Growth and Scaling of Growth Rate Variance in Multiplant Firms

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  • Alex Coad

    () (Max Planck Institute of Economics, Jena, Germany; Centre d'Economie de la Sorbonne, Equipe MATISSE, Univ. Paris 1 - CNRS)

Abstract

While Gibrat's Law assumes that growth rate variance is independent of size, empirical work has usually found a negative relationship between growth rate variance and ï¬rm growth. Using data on French manufacturing ï¬rms, we observe a relatively low, but statistically signiï¬cant, negative relationship between ï¬rm size and growth rate variance. Furthermore, we observe that growth rate variance does not decrease monotonically the more plants a ï¬rm possesses, which is at odds with a number of theoretical models.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-101.

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Date of creation: 18 Dec 2007
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Handle: RePEc:jrp:jrpwrp:2007-101

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Keywords: Growth rate variance; Firm growth; Scaling relationship; Multiplant ï¬rms; Gibrat's Law;

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  1. Alex Coad, 2007. "A Closer Look at Serial Growth Rate Correlation," Review of Industrial Organization, Springer, vol. 31(1), pages 69-82, August.
  2. Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2005. "Corporate Growth and Industrial Dynamics: Evidence from French Manufacturing," LEM Papers Series 2005/21, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Dunne, Paul & Hughes, Alan, 1994. "Age, Size, Growth and Survival: UK Companies in the 1980s," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 115-40, June.
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  5. Giulio Bottazzi & Giovanni Dosi & Marco Lippi & Fabio Pammolli & Massimo Riccaboni, 2001. "Innovation and Corporate Growth in the Evolution of the Drug Industry," LEM Papers Series 2001/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  6. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
  7. Sutton, John, 2002. "The variance of firm growth rates: the ‘scaling’ puzzle," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 312(3), pages 577-590.
  8. 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.
  9. Wahlroos, Bjorn, 1981. "On the Economics of Multiplant Operation: Some Concepts and an Example," Journal of Industrial Economics, Wiley Blackwell, vol. 29(3), pages 231-45, March.
  10. Variyam, Jayachandran N. & Kraybill, David S., 1992. "Empirical evidence on determinants of firm growth," Economics Letters, Elsevier, vol. 38(1), pages 31-36, January.
  11. Nunes Amaral, Luís A & Buldyrev, Sergey V & Havlin, Shlomo & Maass, Philipp & Salinger, Michael A & Eugene Stanley, H & Stanley, Michael H.R, 1997. "Scaling behavior in economics: The problem of quantifying company growth," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 244(1), pages 1-24.
  12. Peter Thompson & Steven Klepper, 2003. "Submarkets and the Evolution of Market Structure," Working Papers 0303, Florida International University, Department of Economics.
  13. G. Bottazzi & E. Cefis & G. Dosi & A. Secchi, 2007. "Invariances and Diversities in the Patterns of Industrial Evolution: Some Evidence from Italian Manufacturing Industries," Small Business Economics, Springer, vol. 29(1), pages 137-159, June.
  14. Amaral, L.A.N. & Gopikrishnan, P. & Plerou, V. & Stanley, H.E., 2001. "A model for the growth dynamics of economic organizations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 127-136.
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