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Testing Gibrat's Law: Empirical Evidence from a Panel of Portuguese Manufacturing Firms

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  • Blandina Oliveira
  • Adelino Fortunato

Abstract

The purpose of this paper is to use Dynamic Panel Data (DPD) models with serial correlation in the error term to see if Gibrat's law holds and to analyse the empirical determinants of firm growth. This paper makes significant contributions to the empirical literature on the dynamics of firm growth, since it updates the work carried out by previous researchers in this field using micro panel data, dynamic firm growth models with serial correlation in the error term, panel unit root tests and GMM-system estimator. To conduct this study we used an unbalanced panel of Portuguese manufacturing firms over the period from 1990 to 2001. The main implication of our findings is that firm growth is not quite random since there are some determinants which exert influence on firm growth.

Suggested Citation

  • Blandina Oliveira & Adelino Fortunato, 2006. "Testing Gibrat's Law: Empirical Evidence from a Panel of Portuguese Manufacturing Firms," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(1), pages 65-81.
  • Handle: RePEc:taf:ijecbs:v:13:y:2006:i:1:p:65-81
    DOI: 10.1080/13571510500519996
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    Cited by:

    1. García-Manjón, Juan V. & Romero-Merino, M. Elena, 2012. "Research, development, and firm growth. Empirical evidence from European top R&D spending firms," Research Policy, Elsevier, vol. 41(6), pages 1084-1092.
    2. Younsuk Park & Jaeun Shin & Taejong Kim, 2010. "Firm size, age, industrial networking, and growth: a case of the Korean manufacturing industry," Small Business Economics, Springer, vol. 35(2), pages 153-168, September.
    3. Marco Corsino, 2008. "Product Innovation and Growth: The Case of Integrated Circuits," ROCK Working Papers 047, Department of Computer and Management Sciences, University of Trento, Italy, revised 23 Jun 2008.
    4. Giunta, Anna & Nifo, Annamaria & Scalera, Domenico, 2009. "Subcontracting in the Italian industry. Labour Division, Firms’ Growth and North-South Divide," MPRA Paper 13084, University Library of Munich, Germany.
    5. Chiara Coluzzi & Annalisa Ferrando & Carmen Martínez-Carrascal, 2009. "Financing obstacles and growth: An analysis for euro area non-financial corporations," Working Papers 0836, Banco de España;Working Papers Homepage.
    6. repec:eee:ecmode:v:70:y:2018:i:c:p:259-271 is not listed on IDEAS
    7. Sven-Olov Daunfeldt & Daniel Halvarsson, 2015. "Are high-growth firms one-hit wonders? Evidence from Sweden," Small Business Economics, Springer, vol. 44(2), pages 361-383, February.
    8. Ioannis Kessides & Li Tang, 2010. "Sunk Costs, Market Contestability, and the Size Distribution of Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(3), pages 215-236, November.
    9. Antje Schimke, 2011. "Factors Affecting the Growth of Manufacturing Firms - Analysis of Growth Stages: A Case of German Firms," ERSA conference papers ersa10p1386, European Regional Science Association.
    10. Anna Giunta & Domenico Scalera & Annamaria Nifo, 2008. "Divisione del lavoro, crescita e divari di performance nell'industria italiana degli anni '90," Departmental Working Papers of Economics - University 'Roma Tre' 0097, Department of Economics - University Roma Tre.
    11. Jan Bentzen & Erik Madsen & Valdemar Smith, 2012. "Do firms’ growth rates depend on firm size?," Small Business Economics, Springer, vol. 39(4), pages 937-947, November.
    12. Ioannis Giotopoulos & Georgios Fotopoulos, 2010. "Intra-Industry Growth Dynamics in the Greek Services Sector: Firm-Level Estimates for ICT-Producing, ICT-Using, and Non-ICT Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(1), pages 59-74, February.
    13. Giorgio Canarella & Stephen M. Miller, 2017. "The Determinants of Growth in the Information and Communication Technology (ICT) Industry: A Firm-Level Analysis," Working papers 2017-12, University of Connecticut, Department of Economics.
    14. Molinari, Massimo, 2013. "Joint analysis of the non-linear debt–growth nexus and cash-flow sensitivity: New evidence from Italy," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 34-44.

    More about this item

    Keywords

    Firm Growth; Gibrat's Law; GMM-System Estimator; Panel Unit Root Tests; JEL Classifications: L11; C23;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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