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Understanding the processes of firm Growth - a closer look at serial growth rate correlation

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Abstract

Serial correlation in annual growth rates carries a lot of information on growth processes - it allows us to directly observe firm performance as well asto test hypotheses. Using a 7-year balanced panel of 10 000 French manufacturing firms, we observe that small firms typically are subject to negative correlation of growth rates, whereas larger firms display positive correlation. Furthermore, we find that those small firms that experience extreme positive or negative growth in any one year are unlikely to repeat this performance in the following year.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2006/R06051.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number r06051.

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Length: 18 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:mse:wpsorb:r06051

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Keywords: Serial correlation; firm growth; quantile regression.;

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  1. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
  2. Alex Coad, 2006. "Towards an explanation of the exponential distribution of firm growth rates," Cahiers de la Maison des Sciences Economiques r06025, Université Panthéon-Sorbonne (Paris 1).
  3. 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.
  4. Kumar, M S, 1985. "Growth, Acquisition Activity and Firm Size: Evidence from the United Kingdom," Journal of Industrial Economics, Wiley Blackwell, vol. 33(3), pages 327-38, March.
  5. Giulio Bottazzi & Elena Cefis & Giovanni Dosi, 2001. "Corporate Growth and Industrial Structure. Some Evidence from the Italian Manufacturing Industry," LEM Papers Series 2001/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  6. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  7. Giulio Bottazzi & Angelo Secchi, 2003. "Common Properties and Sectoral Specificities in the Dynamics of U.S. Manufacturing Companies," Review of Industrial Organization, Springer, vol. 23(3_4), pages 217-232, December.
  8. Singh, Ajit & Whittington, Geoffrey, 1975. "The Size and Growth of Firms," MPRA Paper 51715, University Library of Munich, Germany.
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  10. Goddard, John & Wilson, John & Blandon, Peter, 2002. "Panel tests of Gibrat's Law for Japanese manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 415-433, March.
  11. Alex Coad & Rekha Rao, 2006. "As luck would have it : innovation and market value in "complex technology" sectors," Cahiers de la Maison des Sciences Economiques r06069, Université Panthéon-Sorbonne (Paris 1).
  12. Boeri, Tito & Cramer, Ulrich, 1992. "Employment growth, incumbents and entrants : Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 545-565, December.
  13. repec:hal:cesptp:hal-00642688 is not listed on IDEAS
  14. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the distribution of firm growth rates," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 235-256, 06.
  15. Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2011. "Corporate growth and industrial dynamics: evidence from French manufacturing," Applied Economics, Taylor & Francis Journals, vol. 43(1), pages 103-116.
  16. Mariana Mazzucato & Paul A Geroski, 2001. "Learning and the Sources of Corporate Growth," Open Discussion Papers in Economics 43, The Open University, Faculty of Social Sciences, Department of Economics.
  17. Chesher, Andrew, 1979. "Testing the Law of Proportionate Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 403-11, June.
  18. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  19. Geroski, Paul A, 1999. "The Growth of Firms in Theory and in Practice," CEPR Discussion Papers 2092, C.E.P.R. Discussion Papers.
  20. 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.
  21. Geroski, Paul A & Machin, Stephen & Walters, Christopher F, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 171-89, June.
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Cited by:
  1. Alex Coad & Rekha Rao, 2007. "Innovation and Firm Growth in High-Tech Sectors: A Quantile Regression Approach," Open Discussion Papers in Economics 57, The Open University, Faculty of Social Sciences, Department of Economics.
  2. Alex Coad, 2007. "A Closer Look at Serial Growth Rate Correlation," Review of Industrial Organization, Springer, vol. 31(1), pages 69-82, August.

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