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A Dynamic Model of Size Distribution of Firms Applied to U.S. Biotechnology and Trucking Industries

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  • Fariba Hashemi

    (Swiss Federal Institute of Technology)

Abstract

The present paper attempts to contribute to the existing literature on industry dynamics by proposing a tractable structure for the analysis of the dynamic process governing the size distribution of firms. An analytical model is proposed which describes the density of the cross-sectional distribution of firm size within an industry. The model is based on the theory of diffusion processes, and the method illustrates how information on the time-evolution of size distribution of firms over an extended period of time can be used to make inferences about an underlying process. An empirical application to the evolution of size distribution of population of firms in (i) the U.S. biotechnology industry, and (ii) the U.S. interstate for-hire trucking industry illustrates the applicability of the proposed model in industry studies.

Suggested Citation

  • Fariba Hashemi, 2003. "A Dynamic Model of Size Distribution of Firms Applied to U.S. Biotechnology and Trucking Industries," Small Business Economics, Springer, vol. 21(1), pages 27-36, August.
    • Handle: RePEc:kap:sbusec:v:21:y:2003:i:1:d:10.1023_a:1024433203253
    DOI: 10.1023/A:1024433203253
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    References listed on IDEAS

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    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    2. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58(3), pages 211-211.
    3. Fariba Hashemi, 2000. "An evolutionary model of the size distribution of firms," Journal of Evolutionary Economics, Springer, vol. 10(5), pages 507-521.
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