Advanced Search
MyIDEAS: Login to save this paper or follow this series

Innovation and Corporate Dynamics: A Theoretical Framework

Contents:

Author Info

  • Jakub Growiec
  • Fabio Pammolli
  • Massimo Riccaboni

Abstract

We provide a detailed analysis of a model of innovation and corporate dynamics that encompasses the Gibrat's Law of Proportionate Effect and the Simon growth process as particular instances. The predictions of the model are derived in terms of (i) firm size distribution, (ii) the distribution of firm growth rates, and (iii-iv) the relationships between firm size and the mean and variance of firm growth rates. We test the model against data from the worldwide pharmaceutical industry and find its predictions to be in good agreement with empirical evidence on all four dimensions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.unitn.it/files/download/13980/82011.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Computer and Management Sciences, University of Trento, Italy in its series DISA Working Papers with number 2011/08.

as in new window
Length: 52 pages
Date of creation: Aug 2011
Date of revision: 29 Jul 2011
Handle: RePEc:trt:disawp:2011/08

Contact details of provider:
Postal: via Inama, 5 -- I-38100 Trento TN
Phone: +39-0461-882126
Fax: +39-0461-882124
Email:
Web page: http://www.unitn.it/disa
More information through EDIRC

Order Information:
Postal: DISA Università degli Studi di Trento via Inama, 5 I-38122 Trento TN Italy
Email:
Web: http://www.unitn.it/disa

Related research

Keywords: Business firm size; firm growth distribution; Gibrat's Law; Pareto distribution; lognormal distribution; size-variance relationship.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jakob Klette & Samuel Kortum, 2002. "Innovating firms and aggregate innovation," Staff Report 300, Federal Reserve Bank of Minneapolis.
  2. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
  3. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, 05.
  4. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, 05.
  5. Y. Malevergne & V. Pisarenko & D. Sornette, . "Gibrat’s law for cities: uniformly most powerful unbiased test of the Pareto against the lognormal," Swiss Finance Institute Research Paper Series 09-40, Swiss Finance Institute.
  6. Yamasaki, Kazuko & Matia, Kaushik & Buldyrev, Sergey V. & Fu, Dongfeng & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2004. "Preferential attachment and growth dynamics in complex systems," MPRA Paper 15908, University Library of Munich, Germany, revised 06 Feb 2006.
  7. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, vol. 94(5), pages 1429-1451, December.
  8. Marco Bee & Massimo Riccaboni & Stefano Schiavo, 2011. "Pareto versus lognormal: a maximum entropy test," Department of Economics Working Papers 1102, Department of Economics, University of Trento, Italia.
  9. Orietta Marsili, 2005. "Technology and the Size Distribution of Firms: Evidence from Dutch Manufacturing," Review of Industrial Organization, Springer, vol. 27(4), pages 303-328, December.
  10. Steven Klepper & Peter Thompson, 2006. "Submarkets and the evolution of market structure," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 861-886, December.
  11. Stanley, Michael H. R. & Buldyrev, Sergey V. & Havlin, Shlomo & Mantegna, Rosario N. & Salinger, Michael A. & Eugene Stanley, H., 1995. "Zipf plots and the size distribution of firms," Economics Letters, Elsevier, vol. 49(4), pages 453-457, October.
  12. De Fabritiis, Gianni & Riccaboni, Massimo & Pammolli, Fabio, 2003. "On Size and Growth of Business Firms," MPRA Paper 15866, University Library of Munich, Germany.
  13. Jan Eeckhout, 2009. "Gibrat's Law for (All) Cities: Reply," American Economic Review, American Economic Association, vol. 99(4), pages 1676-83, September.
  14. Gerrit de Wit, 2004. "Firm Size Distributions : An overview of steady-state distributions resulting from firm dynamics models," Scales Research Reports N200418, EIM Business and Policy Research.
  15. Erzo G.J. Luttmer, 2010. "Models of firm heterogeneity and growth," Working Papers 678, Federal Reserve Bank of Minneapolis.
  16. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
  17. 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.
  18. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report 382, Federal Reserve Bank of Minneapolis.
  19. Matraves, Catherine, 1999. "Market Structure, R&D and Advertising in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 169-94, June.
  20. Dongfeng Fu & Fabio Pammolli & S. V. Buldyrev & Massimo Riccaboni & Kaushik Matia & Kazuko Yamasaki & H. E. Stanley, 2005. "The Growth of Business Firms: Theoretical Framework and Empirical Evidence," Papers physics/0512005, arXiv.org.
  21. Fabio Pammolli & Massimo Riccaboni & Laura Magazzini, 2010. "The productivity crisis in pharmaceutical R&D," Working Papers 06/2010, University of Verona, Department of Economics.
  22. Sergey V. Buldyrev & Jakub Growiec & Fabio Pammolli & Massimo Riccaboni & H. Eugene Stanley, 2007. "The Growth of Business Firms: Facts and Theory," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 574-584, 04-05.
  23. De Vany, Arthur & Walls, W David, 1996. "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry," Economic Journal, Royal Economic Society, vol. 106(439), pages 1493-1514, November.
  24. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2004. "Dynamic competition in pharmaceuticals," The European Journal of Health Economics, Springer, vol. 5(2), pages 175-182, May.
  25. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
  26. Marco Corsino, 2008. "Product Innovation and Firm Growth: Evidence from the Integrated Circuits Industry," DRUID Working Papers 08-06, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  27. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1103-1144, 08.
  28. Bottazzi, Giulio & Secchi, Angelo, 2003. "Why are distributions of firm growth rates tent-shaped?," Economics Letters, Elsevier, vol. 80(3), pages 415-420, September.
  29. Stephen Hymer & Peter Pashigian, 1962. "Firm Size and Rate of Growth," Journal of Political Economy, University of Chicago Press, vol. 70, pages 556.
  30. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  31. Growiec, Jakub & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2008. "On the size distribution of business firms," Economics Letters, Elsevier, vol. 98(2), pages 207-212, February.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:trt:disawp:2011/08. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Gabriele).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.