The dynamics of the growth of firms: evidence from the services sector
Using a dynamic panel data model with serial correlation in the error term, the purpose of this paper is to examine if Gibrat’s law can be rejected for the services sector as it has been for manufacturing. The aim of this paper is also to improve the understanding of the empirical determinants of firm growth by extending the literature to include a new variable related to foreign participation. In addition, and based on recent developments in the growth of firms, our analysis also includes the role of the financial structure. The sample used is an unbalanced panel data set that includes all size classes, including the smallest surviving firms, from the Portuguese service sector over the period from 1995 to 2001. Applying the GMM-system and pooled OLS estimators our findings suggest that Gibrat’s law is rejected for services firms. In addition, the results also indicate that firm growth is mainly explained by firm size and age. These results have significant policy implications.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Thomas F. Cooley & Vincenzo Quadrini, 1999.
"Financial Markets and Firm Dynamics,"
99-14, New York University, Leonard N. Stern School of Business, Department of Economics.
- Elston, Julie Ann, 2002. "An Examination of the Relationship Between Firm Size, Growth and Liquidity in the Neuer Markt," Discussion Paper Series 1: Economic Studies 2002,15, Deutsche Bundesbank, Research Centre.
- Fernando Alexandre & Pedro Bação & Vasco Gabriel, 2005.
"On the Stability of the Wealth Effect,"
GEMF Working Papers
2005-17, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Fernando Alexandre & Pedro Bação & Vasco J. Gabriel, 2005. "On the Stability of the Wealth Effect," School of Economics Discussion Papers 1405, School of Economics, University of Surrey.
- Pedro BaÃ§Ã£o & Fernando Alexandre & Vasco J. Gabriel, 2006. "On the stability of the wealth effect," Computing in Economics and Finance 2006 281, Society for Computational Economics.
- Fernando Alexandre & Pedro Bação & Vasco J. Gabriel, 2005. "On the Stablity of the Wealth Effect," NIPE Working Papers 14/2005, NIPE - Universidade do Minho.
- 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.
- Geroski, Paul A & Samiei, Hossein & Urga, Giovanni, 1997. "Are Differences in Firm Size Transitory or Permanent?," CEPR Discussion Papers 1691, C.E.P.R. Discussion Papers.
- Audretsch, D.B. & Klomp, L. & Thurik, A.R., 2002.
"Gibrat's Law: are the services different?,"
ERIM Report Series Research in Management
ERS-2002-04-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- James R. Markusen & Anthony J. Venables, 1997.
"Foreign Direct Investment as a Catalyst for Industrial Development,"
NBER Working Papers
6241, National Bureau of Economic Research, Inc.
- Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
- John Addison & Richard Barrett & W. Siebert, 2006.
"Building blocks in the economics of mandates,"
Portuguese Economic Journal,
Springer, vol. 5(2), pages 69-87, August.
- Addison, John T. & Barrett, C. R. & Siebert, W. Stanley, 2005. "Building Blocks in the Economics of Mandates," IZA Discussion Papers 1866, Institute for the Study of Labor (IZA).
- John T. Addison & C. R. Barrett & W. S. Siebert, 2005. "Building Blocks in the Economics of Mandates," GEMF Working Papers 2005-16, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Addison, J.T. & Barrett, C.R. & Siebert, W.S., 2000. "Building Blocks in the Economics of Mandates," Discussion Papers 00-07, Department of Economics, University of Birmingham.
- Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September.
- John T. Addison & Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006.
"Works Councils in the Production Process,"
Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften,
Duncker & Humblot, Berlin, vol. 126(2), pages 251-283.
- Das, Sanghamitra, 1995. "Size, age and firm growth in an infant industry: The computer hardware industry in India," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 111-126, March.
- Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November.
- José Fariñas & Lourdes Moreno, 2000. "Firms' Growth, Size and Age: A Nonparametric Approach," Review of Industrial Organization, Springer, vol. 17(3), pages 249-265, November.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, June.
- Goddard, John & Molyneux, Phil & Wilson, John O S, 2004. "Dynamics of Growth and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1069-90, December.
- 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.
- Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
- John T . Addison & Paulino Teixeira, 2001. "Technology, Employment and Wages," LABOUR, CEIS, vol. 15(2), pages 191-219, 06.
- Chesher, Andrew, 1979. "Testing the Law of Proportionate Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 403-11, June.
- Tschoegl, Adrian E, 1983. "Size, Growth, and Transnationality among the World's Largest Banks," The Journal of Business, University of Chicago Press, vol. 56(2), pages 187-201, April.
- Addison, John T. & Surfield, Christopher J., 2005.
"‘Atypical Work’ and Compensation,"
IZA Discussion Papers
1477, Institute for the Study of Labor (IZA).
- Evans, David S., 1986.
"Tests of Alternative Theories of Firm Growth,"
86-36, C.V. Starr Center for Applied Economics, New York University.
- repec:dgr:uvatin:20020080 is not listed on IDEAS
- Jong-Rong Chen & Wen-Cheng Lu, 2003. "Panel unit root tests of firm size and its growth," Applied Economics Letters, Taylor & Francis Journals, vol. 10(6), pages 343-345.
- Peter Hart & Nicholas Oulton, 1999. "Gibrat, Galton and Job Generation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(2), pages 149-164.
- Pfaffermayr, Michael & Bellak, Christian, 2000. "Why foreign-owned firms are different : a conceptual framework and empirical evidence for Austria," HWWA Discussion Papers 115, Hamburg Institute of International Economics (HWWA).
- Goddard, John & Wilson, John & Blandon, Peter, 2002. "Panel tests of Gibrat's Law for Japanese manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 415-433, March.
- Blonigen, Bruce A. & Tomlin, KaSaundra, 2001.
"Size and growth of Japanese plants in the United States,"
International Journal of Industrial Organization,
Elsevier, vol. 19(6), pages 931-952, May.
- Bruce A. Blonigen & KaSaundra Tomlin, 1999. "Size and Growth of Japanese Plants in the United States," NBER Working Papers 7275, National Bureau of Economic Research, Inc.
- Variyam, Jayachandran N. & Kraybill, David S., 1992. "Empirical evidence on determinants of firm growth," Economics Letters, Elsevier, vol. 38(1), pages 31-36, January.
- Han T.J. Smit, 1997. "Investment Analysis of Offshore Concessions in the Netherlands," Financial Management, Financial Management Association, vol. 26(2), Summer.
- Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
When requesting a correction, please mention this item's handle: RePEc:kap:empiri:v:35:y:2008:i:3:p:293-312. 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: (Guenther Eichhorn)or (Christopher F. Baum)
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.