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Exploring the "mechanics" of firm growth: evidence from a short-panel VAR

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Abstract

This paper offers many new insights into the processes of firm growth by applying a vector autoregression (VAR) model to longitudinal panel data on French manufacturing firms. We observe the co-evolution of key variables such as growth of employment, sales, gross operating surplus and labour productivity growth. Preliminary results suggest that employment growth is succeeded by the growth of sales, which in turn is followed by growth of profits. Generally speaking, however, growth of profits is not followed by much employment growth or sales growth

Suggested Citation

  • Alex Coad, 2007. "Exploring the "mechanics" of firm growth: evidence from a short-panel VAR," Documents de travail du Centre d'Economie de la Sorbonne r07037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:r07037
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    References listed on IDEAS

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    1. Alex Coad, 2007. "A Closer Look at Serial Growth Rate Correlation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(1), pages 69-82, August.
    2. Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2011. "Corporate growth and industrial dynamics: evidence from French manufacturing," Applied Economics, Taylor & Francis Journals, vol. 43(1), pages 103-116.
    3. Binder, Michael & Hsiao, Cheng & Pesaran, M. Hashem, 2005. "Estimation And Inference In Short Panel Vector Autoregressions With Unit Roots And Cointegration," Econometric Theory, Cambridge University Press, vol. 21(4), pages 795-837, August.
    4. Alex Coad, 2007. "Firm Growth: a Survey," Post-Print halshs-00155762, HAL.
    5. Alessio Moneta, 2005. "Causality in macroeconometrics: some considerations about reductionism and realism," Journal of Economic Methodology, Taylor & Francis Journals, vol. 12(3), pages 433-453.
    6. Brouwer, Erik & Kleinknecht, Alfred & Reijnen, Jeroen O N, 1993. "Employment Growth and Innovation at the Firm Level," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 153-159, May.
    7. Bottazzi, Giulio & Dosi, Giovanni & Lippi, Marco & Pammolli, Fabio & Riccaboni, Massimo, 2001. "Innovation and corporate growth in the evolution of the drug industry," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1161-1187, July.
    8. Giulio Bottazzi & Elena Cefis & Giovanni Dosi, 2002. "Corporate growth and industrial structures: some evidence from the Italian manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(4), pages 705-723, August.
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    10. Giulio Bottazzi & Angelo Secchi & Federico Tamagni, 2008. "Productivity, profitability and financial performance," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(4), pages 711-751, August.
    11. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58(3), pages 211-211.
    12. 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.
    13. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    14. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
    15. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
    16. Joao Pedro Azevedo, 2004. "GRQREG: Stata module to graph the coefficients of a quantile regression," Statistical Software Components S437001, Boston College Department of Economics, revised 17 Mar 2011.
    17. James H. Stock & Mark W. Watson, 2001. "Vector Autoregressions," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 101-115, Fall.
    18. Alex Coad, 2006. "Understanding the processes of firm growth - a closer look at serial growth rate correlation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00118801, HAL.
    19. Delmar, Frederic & Davidsson, Per & Gartner, William B., 2003. "Arriving at the high-growth firm," Journal of Business Venturing, Elsevier, vol. 18(2), pages 189-216, March.
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    Cited by:

    1. Medina-Durango, Carlos Alberto & Posso Suárez, Christian Manuel & Tamayo, Jorge A. & Monsalve, Emma, 2012. "Dinámica de la demanda laboral en la industria manufacturera colombiana 1993-2009 : una estimación panel VAR," Chapters, in: Arango-Thomas, Luis Eduardo & Hamann-Salcedo, Franz Alonso (ed.), El mercado de trabajo en Colombia : hechos, tendencias e instituciones, chapter 7, pages 289-330, Banco de la Republica de Colombia.
    2. Alex Coad & Rekha Rao, 2010. "Firm growth and R&D expenditure," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(2), pages 127-145.
    3. Coad, Alex & Rao, Rekha & Tamagni, Federico, 2011. "Growth processes of Italian manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 54-70, February.
    4. Alexander Coad, 2007. "Disentangling the firm growth process: evidence from a recursive panel VAR," Papers on Economics and Evolution 2007-15, Philipps University Marburg, Department of Geography.
    5. Martin Binder & Alex Coad, 2009. "An Examination of the Dynamics of Happiness Using Vector Autoregressions," Papers on Economics and Evolution 2009-04, Philipps University Marburg, Department of Geography.

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    More about this item

    Keywords

    Firm growth; panel VAR; employment growth; industrial dynamics; productivity growth;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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