research development and firm growth empirical evidence from european top r d spending firms abstract following recent literature we present a model of endogenous firm growth with r d investment as one of the main mechanisms of growth our study evidences a positive effect of r d intensity on the sales growth by using ols quantile regressions and gmm system estimators for a sample of 754 european firms for the 2003 2007 period we also find this association is more intense in high growth firms and is especially significant when referring to high technology sectors this paper gives empirical support to those recommendations from policy makers and business leaders for maintaining the r d expenditures especially in high technology sectors even when facing a recession

firm growth size age and behavior in japanese manufacturing this paper investigates the relationship between firm growth and firm size firm age and firm behavior such as r d activity and subcontracting based on the data of nearly 14 000 japanese manufacturing firms the stylized facts that firm size and age have a negative effect on firm growth are confirmed in the case of japanese manufacturing firms also a firm s survivability rises with its size and age r d expenditure per employee has a significant positive effect on firm growth which justifies the argument made by hall 1987 although subcontracting to only one company has no significant effect on firm growth it has a significant positive effect on a firm s survivability in addition subcon tracting firms depending on only one company as a customer are subject to no significant age effects this possibly suggests that the age effect itself has some relation to the extent of the trade network

are judges leading economic theory sunk costs the threat of entry and the competitive process in this paper we attempt to bring theoretical form to a particular entry argument that has found favor in the courts we suggest that sunk costs may not be a major impediment to entry when a group of customers can commit to an entry enhancing strategy buyers have strong incentives to adopt such strategies because they benefit directly from the resulting lower prices the simplest example involves a large buyer that is able to guarantee an entrant a market for its product long term contracts or even informal purchase commitments backed by customer reputation may also allow the entrant to obtain a guarantee of sufficient business to make the entry profitable once entry is thought likely to occur the existing competitors may be unwilling to attempt a price increase of any magnitude thus the threat of entry can maintain competitive prices even in the presence of sunk costs in section ii we motivate the analysis by discussing the current controversy over the role entry conditions play in an antitrust merger review then we discuss the necessary assumptions for a model of how the threat of entry can deter any price increase in the presence of sunk costs we note that these conditions are different from those commonly used in the economic literature

market performance in an open developing economy technical and allocative efficiencies of korean industries this paper first examines determinants of technical efficiency in terms of competition and government regulation including protection in korean industries relying heavily upon the concepts of x efficiency and rentseeking activities allocative efficiency measured as profitability is then considered with technical efficiency as a determinant the outcome of the regression shows that both the sheltering of industries from international competition and the financial market distortions strongly affect technical efficiency and that technical efficiency as well as effective protection rate are important determinants of profitability

endogenous sequential entry in a spatial model in this paper we simulate a sequential entry of firms in a differentiated industry a la hotelling firms select a product location once for all they are aware of the unique price equilibrium that will take place after entry has occurred and take into account the behaviour of subsequent entrants it is found that early entrants will systematically locate around the centre but in such a way as not to induce later competitors to locate in between them location choices are also investigated as an instrument for entry deterrence which is feasible because of a fixed cost we identify several ranges of fixed cost for which entry is innocently deterred corresponding to a natural monopoly duopoly triopoly entry deterrence is then typically used to stretch the range of fixed cost for which a given number of firms can be sustained deterrence strategies are consistently such that firms locate at more regular intervals

rates of time preference and consumer valuations of automobile safety and fuel efficiency this article estimates hedonic price models for automobiles using a data set on almost 3 000 households from the u s department of energy residential transportation energy consumption survey the standard hedonic models are generalized to recognize the role of discounting of fuel efficiency and safety yielding an estimated rate of time preference ranging from 11 to 17 percent this range includes the prevailing rate of interest for car loans in 1988 and is consequently consistent with market rates purchasers exhibit an implicit value of life ranging from 2 6 to 3 7 million which is within the range found in the labor market as well as other market contexts the model also estimates a significant price effect for auto injury risks and fuel efficiency

a dynamic model of advertising and market shares this paper presents a model of strategic advertising and the battle for market shares between incumbents and entrants the lagged impact of advertising allows incumbents strategically to use preentry advertising to effect the postentry equilibrium solution however because the advantages to advertising are erodable by counter persuasive advertising strategies of entrants the threat of entry may cause incumbents to take retreative or aggressive strategies the incumbants retreative or aggressive posture depends crucially on the erosion impact on their advertising

the economics of aerobics this study presents a simple model that weighs the benefits and costs of aerobic exercise to the individual the model assumes that adding years to life serves as the primary benefit of exercise and that hours of exercise over a lifetime serve as the cost given previous estimates of individual rates of time preference this study finds that people act rationally when they choose to watch a track event rather than choose to run themselves jel i1

advertising sunk costs and barriers to entry this paper tests hypotheses about the entry deterring effects of advertising the model isolates three separate effects of advertising on entry the effect on the irrecoverable costs of entry the effect on the uncertainty underlying the entry environment and the effect on the measured rates of profit we find that advertising impedes entry since necessary advertising expenditures give rise to a sunk cost which raises the risk of entry however we also find a countervailing force due to advertising in that the entrant perceives a greater likelihood of success in markets where advertising is important our analysis shows that the overall impact of advertising on entry is positive

testing gibrat s law for small young and innovating firms this article analyses whether small young and innovating firms have experienced a greater employment growth than other spanish firms over the period 1990 2000 the study draws upon a sample of 1272 manufacturing firms in which only 967 of the firms survived for the entire ten year period the analyses test gibrat s law both by least squares and by utilizing the procedure proposed by heckman in which a probit survival equation is first estimated to correct for sample selection bias two estimators correcting for selection bias are utilized one that incorporates the inverse mill s ratio and the other that employs maximum likelihood methods all the results reject gibrat s law and support the proposition that small firms have grown larger additionally the results show that old firms grow less than young ones and innovating activity both process and product is a strong positive factor in the firm s survival and its employment growth

sales growth of spanish tourist firms some implications of gibrat s law on marketing management abstract the research presented in this paper is targeted towards empirical validation of three hypotheses deduced from gibrat s law and concerning sales growth in the spanish tourism industry the research refers to the years 1997 2000 and uses a sample of 1131 surviving firms all of which are devoted to tourism activities regression correlation and automatic interaction detection techniques were used throughout the sample the results show the existence of two firm growth segments set apart by a threshold size reached only when initial size is measured in sales terms firms above the threshold size grow at a significantly lower accumulated rate than firms below it thus contradicting gibrat s law however no relationship was observed for successive inter annual growth rates this in turn suggests that marketing actions and programmes have rather a medium and long term effect than a short term effect over sales growth sound implications about the firms degree of market opportunity management strategic interdependence and market orientation were deduced from these results

location choice product proliferation and entry deterrence within a slightly modified version of hotelling s model we reconsider the claim that the threat of entry induces existing firms to produce a larger number of products than they would otherwise we show that entry deterrence although optimal need not be achieved through product proliferation in some cases the incumbent monopolist resorts to an entry deterring strategy based on location choice rather than product proliferation we also show that in some cases the number of products chosen by the incumbent facing the threat of entry is strictly greater than the minimum number required to deter entry

generalising gibrat using chinese evidence founded on fieldwork this paper reports on determinants of small firm growth and survival using fieldwork evidence collected by face to face and telephone interviews it extends the basic size age model to a comprehensive growth model with two types of additional explanatory variables firm specific and business environmental estimation is by log linear regression on chinese cross section data with corrections for sample selection bias and heteroskedasticity our results from the comprehensive model highlight the importance of location choice and customer orientation for the growth of chinese private firms

noncooperative behavior by a cartel as an entry deterring signal recent work has investigated the effect of a potential entrant s uncertainty about postentry profits on the likelihood of his entering the market it has always been assumed that the potential entrant knows the type of postentry solution but lacks information on cost or as to whether the postentry solution will be cooperative or noncooperative we find that entry is more likely the greater is the preentry profit rate in equilibrium the threat of entry then forces the incumbent firms to act more competitively to deter entry

resource allocation to defensive marketing and manufacturing strategies abstract in this paper we investigate the coordinated use of marketing and manufacturing strategies to formulate a defensive business strategy for an incumbent firm upon market entry while defensive marketing strategies have been researched extensively little has been done on defensive manufacturing strategies and even less on coordinating these two we propose a formulation for the joint formation of a defensive strategy by the marketing and production functions under budget constraint considerations the incumbent firm may allocate its resourcesto advertising and distribution expenditures as well as to manufacturing investments to reduce the unit production cost the incumbent firm has also the option of simply allocating all of its resources purely to advertising and distribution we show that while there exist cases where the optimal reaction to entry involves investments in manufacturing improvements there are also cases where defense is in marketing strategies alone we identify the market conditions that promote such reactions to entry and also provide sensitivity analysis

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

corporate growth and industrial dynamics evidence from french manufacturing this work explores basic properties of the size and growth rates distributions of firms at the aggregate and disaggregate levels using an extensive dataset on french manufacturing firms we investigate which properties of firm size distributions and growth dynamics characterize the aggregate dynamics and are at the same time robust under disaggregation our analysis is based on non linear robust regression methods which have never been applied before to this kind of data the growth rates distributions we observe are well described by a subbotin distribution with a shape parameter significantly lower than 1 suggesting a noticeable departure from the laplace behavior reported in previous works on italian and us data at the same time the variance of growth rates depends negatively on size and the relationship does not seem to be linear with larger firms possibly displaying lower variability in their growth dynamics at the disaggregate level we observe significant heterogeneity in the firm size distributions across sectors while the shape of the sectoral growth rates density displays a surprising degree of homogeneity

advertising and economies of scale critical comments on the evidence the general issue to be discussed in this review article is does the advertising cost per dollar of sales increase as increases in total advertising expenditures occur stated in this fashion however the question of economies of scale and increasing returns to advertising is vague and equivocal the difficulty of formulating the question in a rigorous enough fashion is the root cause of much of the controversy and confusion about the efficiency of advertising at various levels of advertising expenditures or other forms of advertising input regardless of the formidable theoretical and methodological problems involved the economies of scale in advertising remain an important issue more often than not antitrust measures and public regulation of the marketplace are based on or legitimized by assumptions of substantial scale economies enabling established large corporations to maintain market power keeping competitors out and prices up the purpose of this article is critically to review the most important empirical evidence relating to economies of scale in advertising the article

drivers of sme performance a holistic and multivariate approach to examine the drivers of small and medium sized enterprise sme growth we adopt a holistic multivariate modelling approach integrating macroeconomic determinants with the internal firm characteristics and firm strategy drivers more commonly investigated in firm growth studies utilising such an extended set of variables addresses a gap in the extant firm growth literature in relation to external growth factors offering novel insights on the seeming randomness of firm growth our system generalised method of moments estimation results indicate that the macroeconomic environment influences firm growth both directly and indirectly based on the study of manufacturing sme growth in ireland our findings provide evidence on the integrated effects of macroeconomic conditions firm characteristics and firm strategy for sme growth they also highlight from a theoretical perspective the need to acknowledge the multidimensional nature of sme growth

excess capacity and entry some empirical evidence recent articles by spence i977 dixit i979 and schmalensee i98i have elaborated on wenders i97i1 proposition that excess capacity can act as a barrier to entry the intent of all of these treatments is to suggest that firms may rationally invest in excess capacity with the expectation that excess capacity will be seen by potential entrants either as a signal of aggressive intent or as a credible threat 2 when excess capacity does not lead to creation of a credible threat it may still act as a barrier to entry by shifting the risk return perceptions of potential entrants enough to divert the potential entrants investments into other industries 3 alternatively investment in excess capacity by incumbent firms may reduce the prospects of an active market for the used equipment of a defunct entrant and thereby help to convert fixed costs into sunk costs consequently raising entry barriers 4 this paper represents an exploratory effort to investigate empirically the prevalence and efficiency of excess capacity in deterring entry first a simple and traditional model of entry is presented this is followed by the description of the data used to explore the excess capacity investment concept a combined results and comments section follows the description of the data

r d and the growth of firms empirical analysis of a panel of italian firms abstract this paper deals with the growth of firms and with their innovative activities the main hypothesis of the paper maintains that firms with a strong commitment to r d have a higher rate of growth because they succeed in the product market after a review of the related literature the paper presents an econometric analysis of the r d growth of firms relation based on a database of italian firms data on a sample of 500 firms with time series in the range 1989 1997 were drawn from the mediocredito survey of italian manufacturing descriptive analysis shows that the sales growth rate of firms with r d is higher than that of firms without r d econometric analysis is performed in two steps first we apply a panel unit root test im k pesaran h shin y 1997 testing for unit roots in heterogeneous panels dae university of cambridge mimeo to verify whether the firm size significantly affects firm growth the test confirms gibrat s law that firm size has a stochastic trend second we explore whether there are variables with stochastic trends that could account for firm size according to our estimates the growth rate of firms is positively correlated with research intensity in these estimates a further interesting result is that investment in ict is not significant or shows a parameter with negative sign

the relationship between firm growth and labor demand several american studies have recently estimated models of employment growth from longitudinal data sets of business firms evans 1987 leonard 1986 hall 1987 by and large these studies find that the growth rate of employment is inversely correlated with initial size measured by employment and with age young firms tend to grow more rapidly than old ones these studies have cast considerable doubt on gibrat s law or the assumption of independence between firm size and the rate of growth however departures from gibrat s law are modest especially among firms above minimum size recently a group of researchers has proceeded along similar lines of investigation using data from a panel of italian manufacturing firms located in northern italy the purpose of this paper is to compare our results with those obtained for the u s and to explore in more detail the soundness of this approach our results are similar to the abovementioned american studies we find that departures from gibrat s law are not large

do firms growth rates depend on firm size the empirical literature dealing with corporate growth does not in general give support to gibrat s law stating that the expected increase in firm size is proportionate to its initial size leaving their growth rates independent of size using a relatively large and representative sample of approximately 2 500 danish firms representing all industries we have evaluated the validity of gibrat s law over the period 1990 2004 the present analysis addresses this question by applying econometric methods to test gibrat s law and correcting for problems related to autocorrelation the empirical findings of our study do not generally support gibrat s law but in contrast to the results of earlier studies the analysis reveals that firms growth rates are more likely to be positively related to firm size

limit price entry prevention when complete information is lacking abstract this paper extends an earlier paper by the author in which there were two economic agents an established firm and a potential entrant operating under complete information each agent being assumed to know the profit functions of both firms the present paper extends some of the results of the earlier work to a model in which it is not known with certainty to either agent what the profit functions would be after the entrant would come into the market

impact of global economic crisis on firm growth the global economic crisis has had an adverse effect on and may continue to affect the entrepreneurial sector all over the world however even in a recessionary period there will always be some firms growing faster than others it is therefore imperative to understand the variables and processes that make some firms grow faster or more resilient to crisis than others in this paper we focus on firm size and its contributions to growth we examine whether growth rates of manufacturing and service industries are independent of firm size during the period of economic crisis based on a large sample of surviving firms in the manufacturing and hospitality industries the results of two step dynamic panel suggest that turnover growth is positively associated with companies size during the observed period of economic recession 2008 2013 in both industries large and medium sized firms exhibit higher growth than do small firms

advertising expenditure and consumer prices this paper studies the effect of a change in the marginal costs of advertising on advertising expenditures of firms and on consumer prices i make use of a policy change in austria that involved an increase of the taxation of advertising in parts of the country and a simultaneous decrease in other parts i show that advertising expenditures of firms move quickly in the opposite direction of the marginal costs of advertising consumer prices increase with advertising in some industries and decrease in others this effect correlates with informational differences in advertisements across industries

simultaneous equations models of the structure performance paradigm abstract this paper is concerned with determining the dimension of the simultaneous equations model surrounding the basic profits concentration relationship a very general model is considered and then simplified using a simple test for exogeneity and it is concluded that the model is nonlinear in concentration and that simultaneous interaction occurs between profits and foreign competition variables

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

the role of potential competition in industrial organization potential competition has been recognized as a mechanism to control the exploitation of market power at least since the work of j b clark 1902 but it was not until 50 years later that economists most notably joe bain and paolo sylos labini refocused attention on the idea with inputs from the theories of imperfect competition optimal control and dynamic games their work evolved into ever more sophisticated models of the reactions of existing competitors to the threat of new competition although the most appropriate models of competitive interaction are those which begin with a specific industry a number of theories have been proposed which attempt to develop more general conclusions my purpose in this paper is to develop an understanding of the strengths and limitations of these alternative theories by examining the available theoretical empirical and institutional knowledge rather than attempt the sisyphean task of recounting every model which relates conditions of entry and market performance i have partitioned the analysis into four major schools of thought according to their most central propositions these are the traditional model of limit pricing dynamic limit pricing the theory of contestable markets and the market efficiency model traditional limit pricing models rest on the assumption that firms respond to entry but are able to earn persistent profits when the structural characteristics of markets make entry difficult dynamic limit pricing is similar but emphasizes that markets can only be temporarily protected from entry contestability theory in its pure form asserts that potential competition is as effective as actual competition in controlling market performance the efficient markets hypothesis broadly interpreted states that markets are workably competitive and that the market structure reflects differential efficiency not strategic behavior while one can construct many other hypotheses about potential competition these classifications

what happens to gazelles the importance of dynamic management strategy the starting point of this study is gibrat s law which is contrasted with strategic management this logic is subsequently applied to a group of remarkably dynamic high growth firms gazelles strategic management theory emphasises the importance of firms adjusting strategies in response to changes in the external environment in our study it is used to explain several key empirical findings using a novel british data set containing information on more than 100 gazelles these findings help explain 1 why gibrat s law of random firm growth processes does not generally hold 2 which strategy and environmental variables have a predictable influence on firm performance and 3 why routine application of best practice strategies is unlikely to foster firm growth in a changing economic environment in so doing this paper contributes to the large body of literature on small firm growth

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

individual investor perceptions and behavior during the financial crisis combining monthly survey data with matching trading records we examine how individual investor perceptions change and drive trading and risk taking behavior during the 2008 2009 financial crisis we find that investor perceptions fluctuate significantly during the crisis with risk tolerance and risk perceptions being less volatile than return expectations during the worst months of the crisis investors return expectations and risk tolerance decrease while their risk perceptions increase towards the end of the crisis investor perceptions recover we document substantial swings in trading and risk taking behavior that are driven by changes in investor perceptions overall individual investors continue to trade actively and do not de risk their investment portfolios during the crisis

when is gibrat s law a law the purpose of this article is to investigate if the industry context matters for whether gibrat s law is rejected or not using a dataset that consists of all limited firms in five digit nace industries in sweden during 1998 2004 the results reject gibrat s law on an aggregate level since small firms grow faster than large firms however gibrat s law is confirmed about as often as it is rejected when industry specific regressions are estimated it is also found that the industry context e g minimum efficient scale market concentration rate and number of young firms in the industry matters for whether gibrat s law is rejected or not

heterogeneous rates of time preference and the decision to smoke individuals with higher personal rates of time preference will be more likely to smoke although previous studies have found no evidence of a relationship between smoking and rates of time preference analysis of implicit rates of time preference associated with workers wage fatality risk trade offs indicates that smokers have higher rates of time preference with respect to years of life current smokers have an implied rate of time preference of 13 8 as compared to 8 1 for nonsmokers current smokers who are blue collar workers have rates of time preference with respect to years of life of 16 3 compared to 7 8 for nonsmoking blue collar workers jel i12 d81 d91 smoking imposes substantial health risks many of which are not immediate and will also have long term effects on smokers well being recent estimates of the lost life expectancy due to smoking are 2 4 years for women and 4 4 years for men with some studies indicating even more substantial losses 1 given the latency period before many of the most severe smoking risks are manifested people with greater individual rates of time preference will be less influenced by the discounted value of the health losses and will be more likely to be smokers this paper examines whether this relationship between rates of time preference and smoking behavior is in fact borne out by developing empirical estimates of how smokers and nonsmokers discount years of life lost due to the fatality risks that they incur on the job a variety of researchers have theorized that individuals with higher rates of time preference

corporate investment and bank dependent borrowers during the recent financial crisis abstract we use the recent financial crisis period to analyse the effect of bank credit tightening on firm investment we derive a new set of credit tightening indexes from the ecb bank lending survey combining these with annual balance sheet data from germany france italy spain belgium and portugal we exploit the heterogeneity in the dependence on bank finance of different industries to identify real effects of credit tightening we show that in response to tightening investment falls substantially more in bank dependent industries

the impact of financial crises and tolerance for uncertainty abstract financial crises can have severe negative effects on investment one reason for this is that financial crises increase uncertainty increasing the real option value of delaying investment in this paper we show that the negative effect of crises on investment differs significantly across countries in countries with low tolerance for uncertainty the negative effect is strong the negative effect is absent in countries that are more tolerant of uncertainty these findings are similar across different types of financial crisis they vary as predicted across type of investor asset and industry and they are not driven by uncertainty averse countries adopting more rigid institutions

caveat innovator strategic and structural characteristics of new product introductions abstract the assumptions underlying models of strategic behavior by incumbents are evaluated using a case study of a ground coffee product introduction the assumption underlying earlier strategic models that the entrant does not know the incumbent s payoffs after strategic have been tested does not appear to apply instead strategic behavior is observed to hinge on ex ante uncertainty about the structure of the payoff matrix and the incremental decision making which this uncertainty spawns in this environment strategies which create noise can slow learning and delay entry

defending gibrat s law as a long run regularity according to gibrat s law of proportionate effect the growth rate of a given firm is independent of its size at the beginning of the period examined while earlier studies tended to confirm the law more recent research generally rejects it this article reconciles these two streams of literature taking into account the role of market selection and learning in reshaping a given population of firms through time consistently with previous studies we find that gibrat s law has to be rejected ex ante since smaller firms tend to grow faster than their larger counterparts however a significant convergence toward gibrat like behavior can be detected ex post this finding is an indication that market selection cleans the original population of firms so that the resulting industrial core does not depart from a gibrat like pattern of growth from a theoretical point of view this result is consistent with those models based on passive and active learning and can be seen as a defense of the validity of the law in the long run

a theory of firm growth learning capability knowledge threshold and patterns of growth abstract this paper focuses on the dual role of r d knowledge generation and the technological competence enhancing effect of r d and its implication for the endogenous evolution of r d productivity and the pattern of firm growth in particular based on the evolution of firm specific r d productivity or technological competence this paper derives a simple r d based model of firm growth capable of explaining various aspects of firm growth the model proposes three prototype patterns of firm growth depending on both firm and industry specific characteristics the former includes firm specific technological competence enhancing capability and the initial level of technological knowledge and the latter includes industry specific r d appropriability specifically firms with low technological competence enhancing capability tend to follow a convergent growth pattern in which firm growth gradually declines while firms with high technological competence enhancing capability tend to exhibit either a sustained or a vicious growth pattern depending on the initial size of their technological knowledge stock an empirical analysis of unique data on firm growth and technological capability provides supportive evidence for the role of technological competence enhancing capability in conditioning the pattern of firm growth