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Are There Any Empirical Regularities of Firms' Growth Patterns? The importance of large jumps

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  • ARATA Yoshiyuki
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    Recent studies have revealed that the distribution of firms' growth rates is not Gaussian, but follows a Laplace distribution. This paper explores firms' growth patterns behind this Laplace shape. Using the theory of Lévy processes and infinitely divisible distributions, we show that the growth process is predominantly determined by a few large jumps rather than continuous movements. Namely, firm growth is achieved by a few radical innovations rather than an accumulation of small successes. The observed Laplace distribution reflects this property.

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    File URL: https://www.rieti.go.jp/jp/publications/dp/14e033.pdf
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    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 14033.

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    Length: 28 pages
    Date of creation: Jun 2014
    Handle: RePEc:eti:dpaper:14033
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