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Are Firm Growth Rates Random? Analysing Patterns and Dependencies

  • Toke Reichstein
  • Michael Dahl

Using Danish firm data covering almost 9000 observations, we find significant proof that firm growth cannot be considered as a simple Gibrat growth process. Key variables, such as size, age, geographical location and industry structure are tested against firm growth rates in turnover and employment. Besides running the regressions on all observations, we also consider and find highly interesting patterns in an industry context. Thus, we conclude that firm growth cannot be considered idiosyncratic. Firm growth is highly dependent on industry and geography.

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Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 18 (2004)
Issue (Month): 2 ()
Pages: 225-246

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Handle: RePEc:taf:irapec:v:18:y:2004:i:2:p:225-246
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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
  3. Zoltan J. Acs & David B. Audretsch, 1988. "Testing the Schumpeterian Hypothesis," Eastern Economic Journal, Eastern Economic Association, vol. 14(2), pages 129-140, Apr-Jun.
  4. Geroski, Paul A, 1999. "The Growth of Firms in Theory and in Practice," CEPR Discussion Papers 2092, C.E.P.R. Discussion Papers.
  5. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-52, September.
  6. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  7. Evans, David S., 1986. "Tests of Alternative Theories of Firm Growth," Working Papers 86-36, C.V. Starr Center for Applied Economics, New York University.
  8. Paul Krugman, 1998. "Space: The Final Frontier," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 161-174, Spring.
  9. Malerba, Franco & Orsenigo, Luigi, 1997. "Technological Regimes and Sectoral Patterns of Innovative Activities," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 83-117.
  10. Sawyer, Malcolm C, 1971. "Concentration in British Manufacturing Industry," Oxford Economic Papers, Oxford University Press, vol. 23(3), pages 352-83, November.
  11. Lawrence J. White, 2002. "Trends in Aggregate Concentration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 137-160, Fall.
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