Firm Growth and Scaling of Growth Rate Variance in Multiplant Firms
While Gibrat's Law assumes that growth rate variance is independent of size, empirical work has usually found a negative relationship between growth rate variance and ï¬rm growth. Using data on French manufacturing ï¬rms, we observe a relatively low, but statistically signiï¬cant, negative relationship between ï¬rm size and growth rate variance. Furthermore, we observe that growth rate variance does not decrease monotonically the more plants a ï¬rm possesses, which is at odds with a number of theoretical models.
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