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Industry Dynamics and the Distribution of Firm Sizes: A Non-Parametric Approach

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  • Francesca Lotti
  • Enrico Santarelli

Abstract

The aim of this paper is to analyze the evolution of the size distribution of young firms within some selected industries, trying to assess the empirical implications of different models of industry dynamics: the model of passive learning (Jovanovic 1982), the model of active learning (Ericson and Pakes, 1995), and the evolutionary model (Audretsch, 1995). We use a non-parametric technique, the Kernel density estimator, applied to a data set from the Italian National Institute for Social Security (INPS), consisting in 12 cohorts of new manufacturing firms followed for 6 years. Since the patterns of convergence to the limit distribution are different between industries, we conclude that the model of passive learning is consistent with some of them, the active exploration model with others, the evolutionary model with all of them.

Suggested Citation

  • Francesca Lotti & Enrico Santarelli, 2001. "Industry Dynamics and the Distribution of Firm Sizes: A Non-Parametric Approach," LEM Papers Series 2001/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2001/14
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    Cited by:

    1. Emin Dinlersoz & Glenn MacDonald, 2009. "The Industry Life-Cycle of the Size Distribution of Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 648-667, October.
    2. Peter Huber & Michael Pfaffermayr, 2007. "The Anatomy of the Firm Size Distribution: The Evolution of its Variance and Skewness," WIFO Working Papers 295, WIFO.
    3. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2009. "Defending Gibrat’s Law as a long-run regularity," Small Business Economics, Springer, vol. 32(1), pages 31-44, January.
    4. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    5. P. Ganugi & L. Grossi & G. Gozzi, 2005. "Testing Gibrat's law in Italian macro-regions: Analysis on a panel of mechanical companies," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 14(1), pages 101-126, February.
    6. A. Bonaccorsi & S. Giannangeli, 2010. "One or more growth processes? Evidence from new Italian firms," Small Business Economics, Springer, vol. 35(2), pages 137-152, September.
    7. Josep-Maria Arauzo-Carod & Agustí Segarra-Blasco, 2005. "The Determinants of Entry are not Independent of Start-up Size: Some Evidence from Spanish Manufacturing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(2), pages 147-165, September.
    8. Carlos Carreira & Filipe Silva, 2010. "No Deep Pockets: Some Stylized Empirical Results On Firms’ Financial Constraints," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 731-753, September.
    9. Christopher A Laincz & Ana Sofia Domingues Rodrigues, "undated". "A Theoretical Foundation for Understanding Firm Size Distributions and Gibrat's Law," Discussion Papers 05/34, Department of Economics, University of York.
    10. Francesca Lotti & Marco Vivarelli & Enrico Santarelli, 2004. "Gibrat's Law and Market Selection," Papers on Entrepreneurship, Growth and Public Policy 2004-28, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    11. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    12. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).
    13. Roberto Basile & Sergio De Nardis, 2004. "Non linearità e dinamica della dimensione d'impresa in Italia," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 423-454.
    14. Qi Li & Patrick Paul Walsh, 2009. "The Firm Size Distribution in a Small Open Economy: Theory and Evidence," Working Papers 200920, Geary Institute, University College Dublin.
    15. Ana Sofia Domingues Rodrigues & Christopher A. Laincz, 2004. "Understanding the Variations in Gibrat's Law with a Markov-Perfect Dynamic Industry Model," Computing in Economics and Finance 2004 173, Society for Computational Economics.
    16. ŠEmsa ÖZAR & Gökhan ÖZERTAN & Zeynep Burcu İRFANOĞLU, 2008. "Micro And Small Enterprise Growth In Turkey: Under The Shadow Of Financial Crisis," The Developing Economies, Institute of Developing Economies, vol. 46(4), pages 331-362, December.
    17. Roberto Leombruni, 2002. "Non Price Interaction and Business Fluctuations in an Agent Based Model of Firms’ Demography," LABORatorio R. Revelli Working Papers Series 17, LABORatorio R. Revelli, Centre for Employment Studies.
    18. Audretsch, David & Tamvada, Jagannadha, 2008. "The Distribution of Firm Start-Up Size Across Geographic Space," CEPR Discussion Papers 6846, C.E.P.R. Discussion Papers.
    19. Enrico Santarelli & Francesca Lotti, 2005. "The Survival of Family Firms: The Importance of Control and Family Ties," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 183-192.
    20. Paolo Angelini & Andrea Generale, 2005. "Firm Size Distribution: Do Financial Constraints Explain It All? Evidence From Survey Data," Temi di discussione (Economic working papers) 549, Bank of Italy, Economic Research and International Relations Area.
    21. Brajaballav Kar & Yimer Ayalew Ahmed, 2021. "Quit or continue? The influence of demography, challenges and performance," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 11(1), pages 83-95, December.
    22. Yun, JinHyo Joseph & Won, DongKyu & Jeong, EuiSeob & Park, KyungBae & Yang, JeongHo & Park, JiYoung, 2016. "The relationship between technology, business model, and market in autonomous car and intelligent robot industries," Technological Forecasting and Social Change, Elsevier, vol. 103(C), pages 142-155.
    23. Angel Sevil & Alfonso Cruz & Tomas Reyes & Roberto Vassolo, 2022. "When Being Large Is Not an Advantage: How Innovation Impacts the Sustainability of Firm Performance in Natural Resource Industries," Sustainability, MDPI, vol. 14(23), pages 1-20, December.
    24. Luís Cabral, 2007. "Small firms in Portugal: a selective survey of stylized facts, economic analysis, and policy implications," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 6(1), pages 65-88, April.

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    Keywords

    Cohorts; Gibrats Law; Kernel; Industry Dynamics; Non-parametric; Shakeouts.;
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