When is Gibrat’s law a law?

Daunfeldt, Sven‐Olov; Elert, Niklas

doi:10.1007/s11187-011-9404-x

Cited by 85 publications

(74 citation statements)

References 62 publications

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“…The present results indicate, in line with those of Daunfeldt and Elert (2013) and Lotti et al (2009), that small firms in the Swedish energy sector, on average, grow faster than larger firms. However, this finding is weakened when studying only surviving firms and firms above the industry MES.…”

Section: Introductionsupporting

confidence: 89%

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Does Gibrat’s law hold for Swedish energy firms?

Tang

2014

Empir Econ

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Gibrat's law predicts that firm growth is purely random and should be independent of firm size. We use a random effects-random coefficient model to test whether Gibrat's law holds on average in the studied sample as well as at the individual firm level in the Swedish energy market. No study has yet investigated whether Gibrat's law holds for individual firms, previous studies having instead estimated whether the law holds on average in the samples studied. The present results support the claim that Gibrat's law is more likely to be rejected ex ante when an entire firm population is considered, but more likely to be confirmed ex post after market selection has "cleaned" the original population of firms or when the analysis treats more disaggregated data. From a theoretical perspective, the results are consistent with models based on passive and active learning, indicating a steady state in the firm expansion process and that Gibrat's law is violated in the short term but holds in the long term once firms have reached a steady state. These results indicate that approximately 70% of firms in the Swedish energy sector are in steady state, with only random fluctuations in size around that level over the 15 studied years.

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Section: Introductionsupporting

confidence: 89%

“…In a recent study, Daunfeldt and Elert (2013) studied whether Gibrat's law holds in five-digit NACE industries in Sweden, performing the analysis at various levels of aggregation. Their results indicate that Gibrat's law is rejected at an aggregate level, with small firms outgrowing their larger counterparts.…”

Section: Introductionmentioning

confidence: 99%

Does Gibrat’s law hold for Swedish energy firms?

Tang

2014

Empir Econ

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“…This is largely motivated by the fact that the literature on gazelles emphasizes that the bulk of their economic contribution is due to the process of creative destruction that they are able to engender. Within this line of reasoning, the net job creation ascribed to high growth firms stems from an endless dynamics process in which new opportunities emerge and are likely to replace obsolete activities (Hölzl, 2009(Hölzl, , 2010Henrekson and Johansson, 2010;Daunfelt et al, 2010).…”

Section: Introductionmentioning

confidence: 99%

High-growth firms and technological knowledge: do gazelles follow exploration or exploitation strategies?

Colombelli

Krafft²,

Quatraro³

2013

Industrial and Corporate Change

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ABSTRACT.This paper analyzes the contribution of high-growth firms to the process of knowledge creation. We articulate a demand-pull innovation framework in which knowledge creation is driven by sales growth, and knowledge stems from creative recombination. Given the established literature on high growth firms and economic growth, we wonder whether gazelles follow patterns of knowledge creation mostly dominated by exploration or exploitation strategies. To this purpose, we derive indicators able to describe the structure of knowledge and qualify firms' innovation strategies. The empirical results suggest that the reality is richer than the interpretative frameworks. Increasing growth rates are indeed associated to exploration strategies, supporting the idea that high growth firms are key actors in the creation of new technological knowledge. But in the meantime, firms showing growth rates significantly higher than the average are able to command the exploration strategies by constraining them within the boundaries of familiar technological competences, suggesting that the exploration process is less random than anticipated. We end up with the result that high growth firms, and especially gazelles, follow predominantly an exploration strategy, but with the characteristics of an organized search which is often more observed in an exploitation strategy.

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“…In light of the contradicting evidence regarding the applicability of Gibrat's Law on SMEs, it is important to justify the hypothesis carefully. Gibrat's Law is rejected for SMEs (Daunfeldt & Elert, 2013), and particularly service sector firms (Daunfeldt, Elert & Lang, 2012), however, the direction of this rejection is also important. Following the results of Santarelli, Klomp and Thurik (2006) and also the findings of Reid (2007), Davidsson et al (2006) and many others, the smaller the firm, the more likely the higher the growth will be.…”

Section: Hypothesising the Profit-growth Nexusmentioning

confidence: 99%

“…For the purposes of investigation, it has been determined that it is advantageous to choose a population from a particular country and industry, eliminating cross-industry variation. Audretsch et al (2004) for instance investigate the services sector, Daunfeldt and Elert (2013) study innovative sectors, others explore manufacturing (Lee, 2009) and non-manufacturing (Bhattacharyya & Saxena, 2013) sectors, deriving a variety of conclusions. Focusing on ICT firms promises in terms of being subject to research is its inherent dynamism, and the likelihood of providing a context in which the study can go beyond the mere statistical confirmation of Gibrat's Law.…”

Section: Introductionmentioning

confidence: 99%

Testing relationships between firm size and perceptions of growth and profitability: An investigation into the practices of Australian ICT SMEs

Perényi

Yukhanaev

2016

Journal of Management & Organization

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Gibrat’s Law mandates the independence of firm size and growth, while the resource-based view of the firm implies a positive relationship between firm size and profits, to be concluded in a profit–growth trade-off. Empirical studies of entrepreneurial success however, have demonstrated firms’ ability to reach a state of high growth and profitability, despite the trade-offs encapsulated within the profit–growth nexus. Upon assessing the relationships between past profitability, current firm growth and size in Australian ICT SMEs, results demonstrate positive relationships between all three indicators. This suggests that profitability can be considered the most important precursor of entrepreneurial success, and also that successful businesses do not suffer from the trade-offs implied by theory.

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When is Gibrat’s law a law?

Cited by 85 publications

References 62 publications

Does Gibrat’s law hold for Swedish energy firms?

Does Gibrat’s law hold for Swedish energy firms?

High-growth firms and technological knowledge: do gazelles follow exploration or exploitation strategies?

Testing relationships between firm size and perceptions of growth and profitability: An investigation into the practices of Australian ICT SMEs

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