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The relationship between size and growth: the case of Italian newborn firms

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  • Francesca Lotti
  • Enrico Santarelli
  • Marco Vivarelli

Abstract

This paper analyses the relationship between size and growth for a group of Italian newborn firms in the instruments industry. The main finding is that Gibrat's Law of Proportionate Effect exhibits a behaviour dependent on the firm's life cycle. In particular, even if in the years immediately following start-up the law could be rejected, since smaller firms have to rush in order to survive in the market, in subsequent years growth rates seem to converge towards a Gibrat-like pattern. This result is confirmed by the separate analyses carried out for micro-firms and larger firms.

Suggested Citation

  • Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2001. "The relationship between size and growth: the case of Italian newborn firms," Applied Economics Letters, Taylor & Francis Journals, vol. 8(7), pages 451-454.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:7:p:451-454
    DOI: 10.1080/13504850010003299
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