The Nature of Firm Growth

2021 ◽  
Vol 111 (2) ◽  
pp. 547-579
Author(s):  
Vincent Sterk ◽  
Petr Sedláček ◽  
Benjamin Pugsley
Keyword(s):  
Firm Size ◽  
Firm Growth ◽  
High Growth ◽  
Firm Dynamics ◽  
Dynamics Model ◽  
Firm Level ◽  
Firm Size Distribution ◽  
Ex Post ◽  
Ex Ante ◽  
Macroeconomic Effects

About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups (“gazelles”) since the mid-1980s. (JEL D22, D24, E24, J23, L11, M13)

scholarly journals Large Firm Dynamics and the Business Cycle

2019 ◽  
Vol 109 (4) ◽  
pp. 1375-1425 ◽  
Author(s):  
Vasco M. Carvalho ◽  
Basile Grassi
Keyword(s):  
Business Cycle ◽  
Size Distribution ◽  
Firm Size ◽  
Large Firm ◽  
Firm Dynamics ◽  
Aggregate Fluctuations ◽  
Firm Level ◽  
Firm Size Distribution ◽  
The Business Cycle

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer an analytical characterization of the law of motion of the aggregate state in this class of models, the firm size distribution, and show that aggregate output and productivity dynamics display: (i ) persistence, (ii ) volatility, and (iii ) time-varying second moments. We explore the key role of moments of the firm size distribution, and, in particular, the role of large firm dynamics, in shaping aggregate fluctuations, theoretically, quantitatively, and in the data. (JEL D21, D22, D24, E32, L11)

scholarly journals The Drivers of Firm Growth: Firm Size Effect

2020 ◽  
pp. 29-37
Author(s):  
Yuyang Wang
Keyword(s):  
Firm Size ◽  
Firm Growth ◽  
Firm Strategy ◽  
Jel Classification ◽  
Economic Problem ◽  
Firm Level ◽  
Firm Size Distribution ◽  
Level Data ◽  
Firm Level Data ◽  
Size Firm

This paper discusses an important economic problem which is why and how firms grow and argues that firm size is one of the leading contributors to firm growth discrepancy. We demonstrate the importance of firm size through the analysis of 40 years of Compustat individual firm level data. Our results indicate that despite many business advantages large firms have, smaller firms in the same industry still find their edges in growing their business. JEL classification numbers: B410, C020, C180, C510, C520, C550, L110, L250. Keywords: Firm strategy, Firm growth, Firm size, Firm size distribution, Gibrat's law.

scholarly journals Towards Extending Dividend Puzzle Debate: What Motivates Distribution of Corporate Earnings in Tanzania?

2020 ◽  
Vol 8 (1) ◽  
pp. 18
Author(s):  
Josephat Lotto
Keyword(s):  
Firm Size ◽  
Firm Growth ◽  
Dividend Policy ◽  
Stock Exchange ◽  
High Growth ◽  
Dar Es Salaam ◽  
Corporate Managers ◽  
Financial Firms ◽  
Corporate Earnings ◽  
Control Tool

This paper investigates the determinants of dividend policy in Tanzania. The study employed a panel data of non-financial firms listed on the Dar es Salaam Stock Exchange (DSE) for the period 2008–2017. The paper reports profitability, liquidity, firm size, leverage, firm growth, previous dividend, and GDP as the major determinants of corporate dividend policy. According to the results, leverage, firm growth, and GDP are negatively related to dividend payout ratio while firm size, profitability, liquidity, and lagged dividend are positively related to dividend policy. More specifically, large-sized firms, highly profitable firms, and firms who paid dividend in previous years are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will, therefore, opt saving money to finance their expansion and honor their debt obligations. Following these results, corporate managers are advised to consider preferences of investors towards developing corporate dividend policy; to strive paying dividend whenever economically viable (as it signals the firm’s reputation), and to limit excessive borrowing to protect firms from getting into financial meltdown (although borrowing is considered a control tool for agency-related problems).

scholarly journals Creative Destruction and Uncertainty

2019 ◽  
Vol 18 (4) ◽  
pp. 1814-1843
Author(s):  
Petr Sedláček
Keyword(s):  
Firm Dynamics ◽  
Creative Destruction ◽  
Technology Shocks ◽  
Dynamics Model ◽  
Vector Autoregressions ◽  
Firm Level ◽  
Productivity Shocks ◽  
Technology Growth ◽  
Structural Vector ◽  
Dot Com

Abstract Uncertainty rises in recessions. But does uncertainty cause downturns or vice versa? This paper argues that counter-cyclical uncertainty fluctuations are a by-product of technology growth. In a firm dynamics model with endogenous technology adoption, faster technology growth widens the dispersion of firm-level productivity shocks, a benchmark uncertainty measure. Moreover, faster technology growth spurs a creative destruction process, generates a temporary downturn, and renders uncertainty counter-cyclical. Estimates from structural vector autoregressions (VARs) on U.S. data confirm the model’s predictions. On average, 1/4 of the cyclical variation in uncertainty is driven by technology shocks. This fraction rises to 2/3 around the “dot-com” bubble.

scholarly journals Cyclical Fluctuations, Financial Shocks, and the Entry of Fast-Growing Entrepreneurial Startups

2020 ◽  
Author(s):  
Christoph Albert ◽  
Andrea Caggese
Keyword(s):  
Financial Crises ◽  
Employment Growth ◽  
High Growth ◽  
Growth Potential ◽  
Financial Shocks ◽  
Firm Level ◽  
Cyclical Fluctuations ◽  
Ex Post ◽  
Level Information ◽  
High Growth Potential

Abstract We analyze a multiyear, multicountry entrepreneurship survey with more than one million observations to identify startups with low and high growth potential. We confirm the validity of these ex ante measures with ex post firm-level information on employment growth. We find that negative aggregate financial shocks reduce all startup types, but their effect is significantly stronger for startups with high growth potential, especially when GDP growth is low. Our results uncover a new composition of entry channel that significantly reduces employment growth and is potentially important for explaining slow recoveries after financial crises.

scholarly journals Big Data and Firm Dynamics

2019 ◽  
Vol 109 ◽  
pp. 38-42 ◽  
Author(s):  
Maryam Farboodi ◽  
Roxana Mihet ◽  
Thomas Philippon ◽  
Laura Veldkamp
Keyword(s):  
Big Data ◽  
Size Distribution ◽  
Firm Size ◽  
Firm Dynamics ◽  
Social Value ◽  
The Other ◽  
Intangible Asset ◽  
Small Data ◽  
Firm Size Distribution ◽  
Asset Data

We study a model where firms accumulate data as a valuable intangible asset. Data accumulation affects firms' dynamics. It increases the skewness of the firm size distribution as large firms generate more data and invest more in active experimentation. On the other hand, small data-savvy firms can overtake more traditional incumbents, provided they can finance their initial money-losing growth. Our model can be used to estimate the market and social value of data.

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