Firm Size Distribution and Growth*

Abstract

We empirically characterize the sectoral distribution of firm size for a set of European countries, finding substantial differences in the size distribution within sectors. We then study the relationship between productivity growth at the sectoral level and size structure. We find a positive and robust association between average firm size and growth. We tackle the question of why size should matter for growth, considering the role of innovative activity, to construct a test based on the differential effect of size structure on growth according to different indicators of R&D intensity. Our results indicate that larger average size fosters productivity growth because it makes possible to take advantage of all the increasing returns associated with R&D. We finally argue that our test can be interpreted as a test of reverse causality, which lends support to the view of firm size having a causal impact on growth.

EU–US differences in the size of R&D intensive firms: do they explain the overall R&D intensity gap?

“…The variable used to measure the size of the firm is the total number of employees, rather than total sales, which, as Pagano and Schivardi (2003), pointed out critically depends on the intensity of intermediate inputs.…”

Dice Thrown From the Beginning?: An Empirical Investigation of Determinants of Firm Level Growth Expectations

“…However, some empirical papers indicate a mixed picture. Contrary to transaction cost and life cycle theories, there is strong evidence that large firms can grow quickly (Glansey, 1998;Storey, 1994) and that initial size is positively correlated with later growth (wagner, 1995;Davidsson, 1989;pagano and Schivardi, 2003). As , Davidsson et al (2006) andweinzimmer et al (1998) emphasize, there are different measurement methods (e.g.…”

Three Decades of Italian Comparative Advantages

“…If learning-by-doing is quite effective it can nullify the effect of a change in factor proportions on comparative 1 Aside from trade theory, very many different explanations have been put forward by the numerous social scientists that have discussed the issue over the years (Graziani, 1989;and Ginsborg, 1989). The most acquainted are the heritage of national economic history (Rossi and Toniolo, 1996) and the dualistic structure of the economy (Lutz, 1962), the role of family-owned firms (Burkart, Panunzi and Shleifer, 2002), the inefficiencies of both private and publicly owned large firms (De Cecco, 2004), the large share of small firms in the size distribution of firms (Pagano and Schivardi, 2003), the underdevelopment of the financial system and the inefficiency of the legal system (Guiso, Sapienza and Zingales, 2005), the prevalence of the rentier over the innovator (Nardozzi, 2004), and the absence of industrial policy and the reliance on the strategic use of the exchange rate to enhance competitiveness (Guerrieri and Rossi, 2000). All these various features of Italian development reinforce the traditional structure of comparative advantages emerging in the 1950s.…”