IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Inside the Virtuous Cycle between Productivity, Profitability, Investment and Corporate Growth: An Anatomy of China Industrialization

Listed author(s):
  • X. Yu
  • G. Dosi
  • M. Grazzi
  • J. Lei

This article explores the dynamics of market selection by investigating of the relationships linking productivity, profitability, investment and growth, based on China's manufacturing firm-level dataset over the period 1998-2007. First, we find that productivity variations, rather than relative levels, are the dominant productivity-related determinant of firm growth, and account for 15%-20% of the variance in firms' growth rates. The direct relation between profitability and firm growth is much weaker as it contributes for less than 5% to explain the different patterns of firm growth. On the other hand, the profitability-growth relationship is mediated via investment. Firm's contemporaneous and lagged profitabilities display positive and significant effect on the probability to report an investment spike, and, in turn, investment activity is related to higher firm growth.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://amsacta.unibo.it/4245/1/WP1006.pdf
Download Restriction: no

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp1006.

as
in new window

Length:
Date of creation: May 2015
Handle: RePEc:bol:bodewp:wp1006
Contact details of provider: Postal:
Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna

Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Laura Power, 1998. "The Missing Link: Technology, Investment, And Productivity," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 300-313, May.
  2. Guariglia, Alessandra & Liu, Xiaoxuan & Song, Lina, 2011. "Internal finance and growth: Microeconometric evidence on Chinese firms," Journal of Development Economics, Elsevier, vol. 96(1), pages 79-94, September.
  3. Giulio Bottazzi & Giovanni Dosi & Nadia Jacoby & Angelo Secchi & Federico Tamagni, 2010. "Corporate performances and market selection: some comparative evidence," Industrial and Corporate Change, Oxford University Press, vol. 19(6), pages 1953-1996, December.
  4. Whited, Toni M., 2006. "External finance constraints and the intertemporal pattern of intermittent investment," Journal of Financial Economics, Elsevier, vol. 81(3), pages 467-502, September.
  5. Bottazzi, Giulio & Dosi, Giovanni & Rocchetti, Gaia, 2001. "Modes of Knowledge Accumulation, Entry Regimes and Patterns of Industrial Evolution," Industrial and Corporate Change, Oxford University Press, vol. 10(3), pages 609-638, September.
  6. Silverberg, Gerald & Dosi, Giovanni & Orsenigo, Luigi, 1988. "Innovation, Diversity and Diffusion: A Self-organisation Model," Economic Journal, Royal Economic Society, vol. 98(393), pages 1032-1054, December.
  7. Bottazzi, Giulio & Grazzi, Marco & Secchi, Angelo, 2005. "Input output scaling relations in Italian manufacturing firms," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 95-102.
  8. Marco Grazzi & Nadia Jacoby & Tania Treibich, 2016. "Dynamics of investment and firm performance: comparative evidence from manufacturing industries," Empirical Economics, Springer, vol. 51(1), pages 125-179, August.
  9. Xiaodong Zhu, 2012. "Understanding China's Growth: Past, Present, and Future," Journal of Economic Perspectives, American Economic Association, vol. 26(4), pages 103-124, Fall.
  10. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
  11. William Kerr & Ufuk Akcigit & Nicholas Bloom & Daron Acemoglu, 2012. "Innovation, Reallocation and Growth," 2012 Meeting Papers 1137, Society for Economic Dynamics.
  12. Blandina Oliveira & Adelino Fortunato, 2006. "Firm Growth and Liquidity Constraints: A Dynamic Analysis," Small Business Economics, Springer, vol. 27(2), pages 139-156, October.
  13. Silverberg, Gerald & Verspagen, Bart, 1995. "An Evolutionary Model of Long Term Cyclical Variations of Catching Up and Falling Behind," Journal of Evolutionary Economics, Springer, vol. 5(3), pages 209-227, September.
  14. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  15. Chen, Minjia & Guariglia, Alessandra, 2013. "Internal financial constraints and firm productivity in China: Do liquidity and export behavior make a difference?," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1123-1140.
  16. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
  17. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
  18. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
  19. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
  20. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
  21. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
  22. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
  23. Giovanni Dosi & Marco Grazzi & Chiara Tomasi & Alessandro Zeli, 2012. "Turbulence underneath the big calm? The micro-evidence behind Italian productivity dynamics," Small Business Economics, Springer, vol. 39(4), pages 1043-1067, November.
  24. Giovanni Dosi & Jiasu Lei & Xiaodan Yu, 2013. "Institutional Change and Productivity Growth in China's Manufacturing 1998-2007: the Microeconomics of Creative Restructuring," LEM Papers Series 2013/07, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  25. Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2009. "Lumpy investments, factor adjustments, and labour productivity," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 104-127, January.
  26. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
  27. Jefferson, Gary & Hu, Albert G. Z. & Guan, Xiaojing & Yu, Xiaoyun, 2003. "Ownership, performance, and innovation in China's large- and medium-size industrial enterprise sector," China Economic Review, Elsevier, vol. 14(1), pages 89-113.
  28. Audretsch, David B. & Elston, Julie Ann, 2002. "Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 1-17, January.
  29. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
  30. Cull, Robert & Xu, Lixin Colin, 2003. "Who gets credit? The behavior of bureaucrats and state banks in allocating credit to Chinese state-owned enterprises," Journal of Development Economics, Elsevier, vol. 71(2), pages 533-559, August.
  31. Fu, Xiaolan & Gong, Yundan, 2011. "Indigenous and Foreign Innovation Efforts and Drivers of Technological Upgrading: Evidence from China," World Development, Elsevier, vol. 39(7), pages 1213-1225, July.
  32. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:wp1006. 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: (Dipartimento Scienze Economiche, Universita' di Bologna)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.