The Nature of Firm Growth

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)

Firm Size Distribution and the Effects of Ownership Type

Size distribution is generally accepted as an important characteristic of business structure, one which impacts on competitiveness, with firm size often regarded as the key determinant of entrepreneurial innovativeness. This article describes the size distribution of enterprises taken from a statistical set of Slovak business entities with a special focus on the relation between size and ownership of the businesses. A change in the probability firm size distribution is an undisputable indicator of a change in the business structure. This article seeks to create an eventual starting point for better policymaking in Slovakia, a country which bases its competitiveness primarily on large and medium-sized foreign investments. The authors’ main objective is to determine the size distribution type of the firms. The Anderson-Darling and Kolmogorov-Smirnov tests were used to determine if the dataset has been taken from a population with a specific distribution. Among the main results with regard to Slovak business structure, a statistically significant dependence was shown between the ownership type and the size type of SMEs. The authors confirmed the Pareto, Power and Generalized Gamma distributions as appropriate probability distributions of firm sizes. The probability distribution of SMEs in general as well as according to individual ownership type shows a Lévy distribution. The authors used the environment of the R programming language along with the software EasyFit.

The Drivers of Firm Growth: Firm Size Effect

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.

Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution

In this paper, we estimate the costs associated with an important suite of labor regulations in India by taking advantage of the fact that these regulations apply only to firms above a size threshold. Using distortions in the firm size distribution together with a structural model of firm size choice, we estimate that the regulations increase firms' unit labor costs by 35%. This estimate is robust to potential misreporting on the part of firms and enumerators. We also document a robust positive association between regulatory costs and exposure to corruption, which may explain why regulations appear to be so costly in developing countries.