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Growth and Size of Firms


  • Hart, Peter E
  • Oulton, Nicholas


The authors use a data set of 87,000 independent U.K. companies to investigate the relationship between firm size and growth. For the sample as a whole, a Galton-Markov model of regression towards the mean shows that growth is negatively related to initial size. However, when the sample is broken down by size group, the authors find that regression towards the mean only occurs for the smallest firms, e.g., those with eight employees or less. For larger firms, there is essentially no relationship between growth and size. Even for the smallest firm, the authors' results may be due to transitory factors. Copyright 1996 by Royal Economic Society.

Suggested Citation

  • Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-1252, September.
  • Handle: RePEc:ecj:econjl:v:106:y:1996:i:438:p:1242-52

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    References listed on IDEAS

    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Selten, Reinhard, 1991. "Evolution, learning, and economic behavior," Games and Economic Behavior, Elsevier, vol. 3(1), pages 3-24, February.
    3. A. Roth & I. Er’ev, 2010. "Learning in Extensive Form Games: Experimental Data and Simple Dynamic Models in the Intermediate Run," Levine's Working Paper Archive 387, David K. Levine.
    4. Crawford, Vincent P, 1995. "Adaptive Dynamics in Coordination Games," Econometrica, Econometric Society, vol. 63(1), pages 103-143, January.
    5. Binmore, Ken, 1987. "Modeling Rational Players: Part I," Economics and Philosophy, Cambridge University Press, vol. 3(02), pages 179-214, October.
    6. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
    7. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
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