De Fabritiis, Gianni and Riccaboni, Massimo and Pammolli, Fabio (2003): On Size and Growth of Business Firms. Published in: Physica A , Vol. 1-2, No. 324 (June 2003): pp. 38-44.
Download (184Kb) | Preview
We study size and growth distributions of products and business firms in the context of a given industry. Firm size growth is analyzed in terms of two basic mechanisms, i.e. the increase of the number of new elementary business units and their size growth. We find a power-law relationship between size and the variance of growth rates for both firms and products, with an exponent between -0.17 and -0.15, with a remarkable stability upon aggregation. We then introduce a simple and general model of proportional growth for both the number of firm independent constituent units and their size, which conveys a good representation of the empirical evidences. This general and plausible generative process can account for the observed scaling in a wide variety of economic and industrial systems. Our findings contribute to shed light on the mechanisms that sustain economic growth in terms of the relationships between the size of economic entities and the number and size distribution of their elementary components.
|Item Type:||MPRA Paper|
|Original Title:||On Size and Growth of Business Firms|
|Keywords:||Firm Growth; Power Laws, Gibrat's Law; Economic Growth; Pharmaceutical Industry|
|Subjects:||L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L65 - Chemicals; Rubber; Drugs; Biotechnology
D - Microeconomics > D3 - Distribution > D39 - Other
|Depositing User:||Unnamed user with email email@example.com|
|Date Deposited:||22. Jun 2009 13:50|
|Last Modified:||17. Feb 2013 18:34|
Gabaix, X.: 2003, Power laws and the origins of the business cycle, Technical report, mimeo.
Hymer, S. and Pashigian, P.: 1962, Firm size and rate of growth, The Journal of Political Economy pp. 556–569.
Ijiri, Y. and Simon, H.: 1975, Some distributions associated with Bose-Einstein statistics, Proceedings of the National Academy of Sciences 72(5), 1654–1657.
Ijiri, Y. and Simon, H.: 1977, Skew Distributions and the Sizes of Business Firms: Charles P. Bonini, Theodore A. Van Wormer., North Holland.
Mansfield, E.: 1962, Entry, Gibrat’s law, innovation, and the growth of firms, The American Economic Review pp. 1023–1051.
Schwartz, S. and Yeh, Y.: 1982, On the distribution function and moments of power sums with log-normal components, Bell Syst. Tech. J 61(7), 1441–1462.
Simon, H.: 1964, Comment: Firm Size and Rate of Growth, The Journal of Political Economy pp. 81–82.
Sornette, D.: 2000, Critical phenomena in natural sciences, Springer New York.
Stanley, M., Amaral, L., Buldyrev, S., Havlin, S., Leschhorn, H., Maass, P., Salinger, M. and Stanley, H.: 1996, Scaling behaviour in the growth of companies.
Sutton, J.: 2002, The variance of firm growth rates: The scaling puzzle, Physica A: Statistical Mechanics and its Applications 312(3-4), 577–590.