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Are differences in firm size transitory or permanent?*

* This paper has been replicated

Author

Listed:
  • G. Urga

    (London School of Economics, UK)

  • P. A. Geroski

    (Dept. of Economics, London Business School, Sussex Place, Regents Park, London, NW1 4SA, UK)

  • S. Lazarova

    (London Business School, UK)

  • C. F. Walters

    (City University Business School, UK)

Abstract

Previous empirical work on corporate growth rates using cross-section or short-panel econometric techniques suggests that growth rates are random but that some degree of mean reversion exists. This means that size differences between firms are transitory. Another, more natural way to explore the long-run distribution of firm sizes is to examine data on the growth of particular firms over long periods of time. Using a sample of 147 UK firms observed continually for more than 30 years, our conclusions are that growth rates are highly variable over time and that differences in growth rates between firms do not persist for very long. Further, firms show no tendency to converge to either a common size or to a pattern of stable size differences over time. These results are compared and contrasted with standard approaches that suggest that firms reach and maintain stable positions in a skewed size distribution. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • G. Urga & P. A. Geroski & S. Lazarova & C. F. Walters, 2003. "Are differences in firm size transitory or permanent?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 47-59.
    • Handle: RePEc:jae:japmet:v:18:y:2003:i:1:p:47-59
    DOI: 10.1002/jae.676
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    Replication

    This item has been replicated by:
  • Kim P. Huynh & David T. Jacho‐Chávez, 2010. "Firm size distributions through the lens of functional principal components analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1211-1214, November/.

    • More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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