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Testing Gibrat's legacy: A Bayesian approach to study the growth of firms

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  • Cefis, Elena
  • Ciccarelli, Matteo
  • Orsenigo, Luigi

Abstract

Gibrat's law is a referent model of corporate growth dynamics. This paper employs Bayesian panel data methods to test for Gibrat's law and its implications. Using a Pharmaceutical Industry Database (1987-1998), we find evidence against Gibrat's law on average, within or across industries. Estimated steady states differ across firms, and firm sizes and growth rates don't converge within the same industry to a common limiting distribution. There is only weak evidence of mean reversion: initial larger firms do not grow relatively slower than smaller firms. Differences in growth rates and in size steady state are persistent and firm-specific, rather than size-specific.
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  • Cefis, Elena & Ciccarelli, Matteo & Orsenigo, Luigi, 2007. "Testing Gibrat's legacy: A Bayesian approach to study the growth of firms," Structural Change and Economic Dynamics, Elsevier, vol. 18(3), pages 348-369, September.
  • Handle: RePEc:eee:streco:v:18:y:2007:i:3:p:348-369
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    2. Bergner, Sören Martin & Bräutigam, Rainer & Evers, Maria Theresia & Spengel, Christoph, 2017. "The use of SME tax incentives in the European Union," ZEW Discussion Papers 17-006, ZEW - Leibniz Centre for European Economic Research.
    3. Alessandra Colombelli & Jackie Krafft & Francesco Quatraro, 2015. "Eco-innovation and Firm Growth: Do Green Gazelles Run Faster? Microeconometric Evidence from a Sample of European Firms. WWWforEurope Working Paper No. 88," WIFO Studies, WIFO, number 57897, February.
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    5. Riccardo Leoncini & Alberto Marzucchi & Sandro Montresor & Francesco Rentocchini & Ugo Rizzo, 2016. "‘Better late than never’: a longitudinal quantile regression approach to the interplay between green technology and age for firm growth," SEEDS Working Papers 0616, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised May 2016.
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    7. Colombelli, Alessandra & Haned, Naciba & Le Bas, Christian, 2013. "On firm growth and innovation: Some new empirical perspectives using French CIS (1992–2004)," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 14-26.
    8. Johan Krisnanto Runtuk & Poh Kiat Ng & Shih Yin Ooi & Remigius Purwanto & Arief Suardi Nur Chairat & Yu Jin Ng, 2023. "Sustainable Growth for Small and Medium-Sized Enterprises: Interpretive Structural Modeling Approach," Sustainability, MDPI, vol. 15(5), pages 1-12, March.

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