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Corporate performances and market selection. Some comparative evidence

  • Giulio Bottazzi

    ()

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

  • Giovanni Dosi

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

  • Nadia Jacoby

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Angelo Secchi

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

  • Federico Tamagni

    (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)

Diverse theories of industry dynamics predict heterogeneity in production efficiency to be the driver of firms' growth, survival and industrial change, either through a direct link between efficiency and growth, or through an indirect effect via profitabilities, as more productive firms can enjoy higher profit margins which, under imperfect capital markets, allow them to invest and grow more. Does the empirical evidence bear such predictions? This paper explores the dynamics of selection and reallocation through an investigation of the productivity-profitability-growth relations at the firm level. Exploiting large panels of Italian and French industrial firms, we find that heterogeneity in efficiencies primarily yield persistent profitability differentials, whereas the relationships of corporate growth with either productivity or profitability appear much weaker, if at all existent. This suggests that selection forces are much less strong than usually assumed. Rather, the links between efficiency and corporate growth seem profoundly mediated by large degrees of behavioural freedom. The results robustly applies across different industrial sectors and across the two countries.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00422142.

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Date of creation: 2009
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Publication status: Published in LEM Working Paper series n°2009/13. 2009, pp.1953-1996
Handle: RePEc:hal:cesptp:hal-00422142
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