Firm Size Distribution and Growth
We empirically characterize the sectoral distribution of firm size for a set of European countries, finding substantial differences. We then study the relationship between productivity growth at the sectoral level and size structure. We find a positive and robust association between average firm size and growth. Asking why size should matter for growth, we consider the role of innovative activity, to construct a test based on the differential effect of size on growth according to various indicators of R&D intensity at the sectoral level. Our results indicate that larger size fosters productivity growth because it allows firms to take advantage of all the increasing returns associated with R&D. We finally argue that our test can be interpreted as a test of reverse causality, which lends support to the view of firm size having a causal impact on growth.
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| Date of creation: | Feb 2001 |
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| Handle: | RePEc:bdi:wptemi:td_394_01 |
| Contact details of provider: | Postal: Web page: http://www.bancaditalia.it More information through EDIRC
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