IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v26y2006i2p117-123.html
   My bibliography  Save this article

Testing Gibrat’s Law for Small, Young and Innovating Firms

Author

Listed:
  • José Calvo

    ()

Abstract

This article analyses whether small, young, and innovating firms have experienced a greater employment growth than other Spanish firms over the period 1990–2000. The study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period. The analyses test Gibrat’s law, both by least squares and by utilizing the procedure proposed by Heckman in which a probit survival equation is first estimated to correct for sample selection bias. Two estimators correcting for selection bias are utilized: one that incorporates the inverse Mill’s ratio and the other that employs maximum likelihood methods. All the results reject Gibrat’s law and support the proposition that small firms have grown larger. Additionally, the results show that old firms grow less than young ones, and innovating activity – both process and product – is a strong positive factor in the firm’s survival and its employment growth. Copyright Springer 2006

Suggested Citation

  • José Calvo, 2006. "Testing Gibrat’s Law for Small, Young and Innovating Firms," Small Business Economics, Springer, vol. 26(2), pages 117-123, March.
  • Handle: RePEc:kap:sbusec:v:26:y:2006:i:2:p:117-123 DOI: 10.1007/s11187-004-2135-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11187-004-2135-5
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    2. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
    3. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-1270, September.
    4. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2000. " When Less Is More: Distinguishing between Entrepreneurial Choice and Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(5), pages 565-587, December.
    5. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, pages 334-347.
    6. Taylor, Mark P, 2001. "Self-Employment and Windfall Gains in Britain: Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 68(272), pages 539-565, November.
    7. Cowling, Marc & Mitchell, Peter, 1997. "The Evolution of U.K. Self-Employment: A Study of Government Policy and the Role of the Macroeconomy," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(4), pages 427-442, September.
    8. Burke, Andrew E & FitzRoy, Felix R & Nolan, Michael A, 2002. "Self-Employment Wealth and Job Creation: The Roles of Gender, Non-pecuniary Motivation and Entrepreneurial Ability," Small Business Economics, Springer, vol. 19(3), pages 255-270, November.
    9. Andrew Henley, 2004. "Self-Employment Status: The Role of State Dependence and Initial Circumstances," Small Business Economics, Springer, vol. 22(1), pages 67-82, February.
    10. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-535, June.
    11. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-266, May.
    12. Black, Jane & de Meza, David & Jeffreys, David, 1996. "House Price, the Supply of Collateral and the Enterprise Economy," Economic Journal, Royal Economic Society, vol. 106(434), pages 60-75, January.
    13. Bhat, Chandra R., 1994. "Imputing a continuous income variable from grouped and missing income observations," Economics Letters, Elsevier, vol. 46(4), pages 311-319, December.
    14. Rees, Hedley & Shah, Anup, 1986. "An Empirical Analysis of Self-employment in the U.K," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 95-108, January.
    15. Lindh, Thomas & Ohlsson, Henry, 1996. "Self-Employment and Windfall Gains: Evidence from the Swedish Lottery," Economic Journal, Royal Economic Society, vol. 106(439), pages 1515-1526, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    L11; L25;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:26:y:2006:i:2:p:117-123. 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: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.