persistence of initial debt in the long term employment dynamics of new firms this paper investigates whether a firm s future growth is independent of its initial debt structure the non parametric test consists of determining whether the conditional size distribution for firms surviving through early years of life depends upon debt to asset ratio at birth initially i test for initial size dependence in the growth process by applying pakes and ericson 1998 procedure i then test the hypothesis that initial debt to asset ratios are irrelevant to growth of ten year old manufacturing firms i reject the null of independence and find evidence of a non monotonic relationship between age ten conditional size and the initial debt to asset ratio ce texte examine la question a savoir si la croissance future d une firme depend de la structure initiale de sa dette le test non parametrique consiste a determine si la distribution conditionnelle de la taille des firmes qui survivent au cours des premieres annees depend du ratio dette actif a la naissance l auteur teste d abord l independance de la taille initiale et du processus de croissance a l aide de la procedure de pakes et ericson 1998 et ensuite l hypothese que le ratio initial dette actif n est pas pertinent pour expliquer la croissance de firmes manufacturieres qui ont survecu dix ans l hypothese nulle d independance est rejetee et on trouve trace d une relation non monotone entre la taille conditionnelle a dix ans et le ratio initial de la dette sur l actif

submarkets and the evolution of market structure we construct a model of industry evolution in which the central force for change is the creation and destruction of submarkets firms expand when they are able to exploit new opportunities that arrive in the form of submarkets they contract and ultimately exit when the submarkets in which they operate are destroyed this simple framework can transparently explain a wide range of well known regularities about industry dynamics most notably the subtle relationships between size age growth and survival data on the laser industry where submarkets are prominent further illustrate the ability of the model to explain distinctive patterns in the evolution of industries and firms

new firm startups technology and macroeconomic fluctuations new firm startup activity is examined within a framework pooling a cross section of 117 industries over six time periods between 1976 and 1986 a model is introduced relating startup activity both to elements of the business cycle in particular the macroeconomic growth rate the cost of capital and the unemployment rate and to industry specific characteristics especially the technological conditions underlying the industry the pooled cross section regression results suggest that macroeconomic fluctuations as well as industry specific elements contribute to startup activity while new firm startups respond positively to macroeconomic growth they are promoted by a low cost of capital and high unemployment rate a somewhat surprising result is that new firm startups are not apparently deterred in capital intensive industries and where r d expenditures play an important role the empirical results suggest that new firms may be able to overcome their inherent size and experience disadvantages in such markets through exploiting university research and pursuing innovative activity

growth of firms in developing countries evidence from cote d ivoire the paper presents evidence in support of a particular growth process of firms that is consistent with a missing middle in the size distribution of manufacturing firms in african countries firm growth is explained by size and age effects as a result of efficiency exploiting through scale enlargements and learning but is strongly moderated by reputation effects and formal legitimation which facilitate access to output markets and resources complementing the model with data on growth obstacles as perceived by the owners of firms medium sized firms are found to be strongly hurt by insufficient access to infrastructure and financial services

public subsidies and the employment growth of high tech start ups assessing the impact of selective and automatic support schemes the aim of this article is to assess the impact of public subsidies on the employment growth of new technology based firms ntbfs contingent on i the type of policy scheme either selective or automatic and ii the age of the firms at the time of receipt of the subsidy for this purpose we analyze a sample composed of 536 italian independent ntbfs observed during a 10 year period 1994 2003 we estimate augmented gibrat law type dynamic panel data models using different techniques aimed at controlling for the potentially endogenous nature of public financing namely the generalized method of moments system fixed effect instrumental variable and inverse probability treatment weights estimators the results of the estimates show that selective support schemes had a larger impact on employment growth than automatic ones but only if they were awarded in the very early period of the recipient firms lives however selective subsidies awarded to young ntbfs are rare in italy calling into question the capability of the italian industrial policy to sustain the growth of the high tech entrepreneurial sector

persistence survival and growth a closer look at 20 years of fast growing firms in austria for survival persistence and growth hifs show a much higher persistence than hgfs the average growth rate after the high growth episode is quite modest for both hifs and hgfs policy implications of the ndings are discussed

firm size distributions an overview of steady state distributions resulting from firm dynamics models abstract empirical firm size distributions are the cumulated result of underlying firm dynamics involving entry of new firms and growth decline and exits of incumbent firms in this paper we give an overview of firm size distributions that result as steady states from models differing in the way these firm dynamics are modelled in the process we i derive common results and explain seemingly contradictory results ii propose new functional forms to describe firm size distributions iii give insight in the interrelationships between the distributions in terms of underlying firm dynamics iv give possible firm dynamical interpretations of the parameters of the distributions and v analyse to which extent the steady state approach is able to explain the shape of firm size distributions that are encountered in practice

persistence of innovative activities sectoral patterns of innovation and international technological specialization abstract in this paper we focus on the role of persistence and heterogeneity of innovative activities at the level of the firm in determining the patterns of technological change in different industries and countries we ask are persistence and heterogeneity associated with higher degrees of concentration in innovative activities stability in the ranking of innovators and lower degrees of entry and exit in the population of innovators or do the patterns of innovation depend on other variables like firm size and industrial concentration moreover what are the relationships between the patterns of innovative activities their determinants and the technological specialization of countries we compute indicators of persistence and heterogeneity using the otaf spru patent database at the firm level for five european countries over the period 1969 1986 for 33 technological classes then we estimate the relationships between our indicators of the sectoral patterns of innovative activities and international technological specialization on the one hand and our indicators of persistence heterogeneity and market structure on the other results show that persistence and asymmetries are important and strongly related phenomena that affect the patterns of innovative activities across countries and sectors while the role of market structure variables is less clear finally international technological specialization is associated to a competitive core of persistent innovators

a theoretical approach to the effect of trade union immunities on investment and employment the uk trade union immunity laws have been the subject of considerable political debate in recent years with the political parties differing markedly in their attitudes to the present status of labour contracts in contrast to the political debate no positive economic analysis of the consequences of these laws exists on which one might base policy judgements the purpose of this paper is to suggest one approach which provides a positive theoretical analysis of the effects of these laws on investment and employment for our analysis the crucial feature of the law is that an employer cannot recover any losses suffered if a union withholds labour from his firm even if there is a written contract that labour will work for an agreed period at a given wage rate this is a feature of uk collective bargaining which is unique amongst advanced countries see sachs 1979 there are several approaches one could take to analyse the effects of trade union immunities tui put most generally the critical reason for following the present approach is the view that one will gain most insight into the effects of tui on investment and employment by looking at models where workers have an incentive to push home an ex post advantage that arises because shareholders are locked into specific capital levels the model we analyse a single investment opportunity where workers do not have access to perfect capital markets is the extreme case of many models of this type the notion which underlies the model is the following a union is only able to extract a wage which is greater than the competitive wage w from a firm if they can threaten the firm with some strategy that hurts shareholders if the union can prevent production taking place then the shareholders are hurt because they are the owners of capital purchased at c per unit which is lying idle the more

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

large firm dynamics and 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

one or more growth processes evidence from new italian firms the paper proposes a descriptive model of firm growth which assumes that learning processes are conditional on existing competencies of the firm and its founders we suggest the idea that firms who do not grow under all realizations of potentially profitable opportunities can be considered as zero learning in order to explain why some firms are zero learning and how these are different from growing ones we put forward and discuss the hypothesis that both start up size and founders pre entry history affect the firm s ability to adjust to market using a sample of 3 905 italian firms born in 1999 and 2000 we find that individual competencies influence start up size but not directly growth we also find a significant nonlinear relationship between start up size and growth implying that firms which were born smaller than a given size grow significantly less the results support the hypothesis that multiple and heterogeneous growth processes coexist and that the growth process of microfirms below a given organizational threshold may be structurally different in the long run from that of firms starting up above that threshold

incentives in the generalized mdp procedure for the provision of public goods malinvaud 1970 1971 and dreze and de la vallee poussin 1971 have independently proposed a well defined planning procedure for an economy with public goods this procedure which has come to be called the mdp procedure has several desirable properties given correct revelation of each participant s preference if each individual truthfully announces his marginal rates of substitution between public goods and a private good every trajectory of the process lies entirely in the space of feasible allocations and monotonically converges to an individually rational pareto optimum moreover as is shown in champsaur 1976 given correct revelation this procedure is neutral to any kind of distributional value judgements in the sense that every individually rational pareto optimum can be attained as a limit of some trajectory defined by the process in connection with the problem of whether the participants in the mdp procedure reveal their correct preferences little literature has so far been written there are now results available which have been derived by dreze and de la vallee poussin 1971 and roberts 1979 that i at every iterative stage telling the truth is a maximin strategy for each individual and at an equilibrium of the process is a nash equilibrium strategy and that ii correct revelation produces a dominant strategy equilibrium at every instant if a society consists of just two individuals nevertheless maximin strategies are played only because of the rather restricted assumption on each participant s behaviour while confinement to the case of a two person society is too severe to give meaningful implications for reality in either case one might be fully justified in believing that truthful revelation will hardly appear in the mdp procedure fortunately almost all the properties of the mdp procedure can be preserved under circumstances where the agents misrepresent their marginal rates of substitution henry 1979 and roberts 1979 have shown that as long as each individual chooses a nash type strategy at each instant the process maintains the same properties as in the case of correct revelation except that the adjustment speeds of public goods are significantly reduced this result implies the mdp procedure is implementable under game theoretic circumstances but at the same time it exposes serious problems in several respects in the first place since the nash equilibrium strategy of each agent is not necessarily the truthful announcement the virtue of honesty is no longer of positive significance in the mdp procedure secondly for the validity of its solution concept if each agent plays a nash equilibrium strategy at all he must have complete knowledge relating to the possible strategies chosen by all the other agents clearly this supposition

employment change in independent owner managed high technology firms in great britain there is a growing volume of literature that points to the potential for small technology based firms to achieve substantial employment growth as a direct consequence of such work this sector of any economy has attracted increasing attention from national and local governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities this paper provides up to date empirical evidence surrounding the ability of small high technology firms to create additional jobs in great britain in addition key founder and business characteristics are isolated which are significantly associated with employment change in growing high technology firms over the 1986 to 1992 period with respect to factors influencing these high levels of employment growth a high firm size in 1986 was found to act positively on employment growth as was a graduate level education for the key founder on the finance side firms which had access to and used a multiplicity of sources of start up finance tended to grow faster futher on the basis of our results we would suggest and recommend a government policy which at the firm level actively encourages high technology firm start ups who record higher rates of survival than firms in more conventional sectors as well as providing support for existing high technology firms who have already demonstrated the inclination and ability to grow in employment size

the small the young and the productive determinants of manufacturing firm growth in ethiopia abstract this study examines the relationships between firm growth and firm size age and labor productivity using annual census based panel data on ethiopian manufacturing firms the study explicitly addresses the ongoing statistical concerns in firm growth models such as sample censoring regression to the mean and unobserved heterogeneity our empirical results indicate that firm growth decreases with size smaller firms have faster rates of growth than larger firms even after compensating for their higher attrition rates the negative relation between age and growth predicted by the learning model is found to apply only to younger firms labor productivity affects firm growth positively which indicates that there is a market selection process at work during the period of economic reforms in ethiopia

small business growth in the short run this paper examines the determinants of short run employment growth in very small firms in the services sector the study shows evidence of non linearities in the growth size relationship and it is argued that these non linearities reflect the short run constraints that small firms face in adjusting to demand shocks the paper also suggests that there are other systematic influences on growth apart from size the paper draws on survey evidence from the northern region of the united kingdom

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

cross sectoral variation in the volatility of plant level idiosyncratic shocks we estimate the volatility of plant level idiosyncratic shocks in u s manufacturing we measure the variation in revenue total factor productivity not explained by either industry or economy wide factors or by establishments characteristics we find that idiosyncratic shocks are much larger than aggregate shocks accounting for about 80 of the overall uncertainty faced by plants plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile we provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater

on growth drivers of high tech start ups exploring the role of founders human capital and venture capital abstract in this paper we jointly analyze the effects of the human capital of founders and access to venture capital vc financing on the growth of 439 italian new technology based firms ntbfs we rely on econometric models that control for survivorship bias and the endogeneity of vc financing as to non vc backed firms the competence based argument that the capabilities of ntbfs coincide with founders skills is confirmed nonetheless once a ntbf obtains vc this coincidence vanishes pointing to the coach function performed by vc investors conversely the view that sees the scout function as the main task performed by vc investors is not supported

survival duration of plants evidence from the us petroleum refining industry abstract this paper presents a duration analysis on the survival of us petroleum refining plants for the 1981 1986 period when the industry as a whole declines in response to the decontrol of crude oil markets the purpose is to examine the duration dependence and determinants of post deregulation plant lifetimes the weibull model with the correction for unobserved individual heterogeneity provides a better fit to the data empirical results show that plant size age regulatory subsidies technology use and multiplant coordination are key determinants of refinery life duration after deregulation in addition major integrated oil companies tend to make timely restructuring via refinery closures and sales the interactive effects of size and technology use and of multiplant coordination and integrated organization are also important to the refinery survival

the role of linkages in firm performance evidence from southern italy abstract this paper estimates the probability of success of post entry performance of new firms using survey data from a group of southern italian small firms several factors involving inter firm linkages contribute to success especially production for order and subcontracting the empirical investigation supports hirschman s idea on the industrialization process and positive assessments of the downsizing phenomenon in italy

a characterization of strongly locally incentive compatible planning procedures with public goods this paper provides a systematic study of planning procedures with public goods in which local truthful revelation of preferences is a dominant strategy these procedures are said to be strongly locally individually incentive compatible sliic we first characterize the time invariant continuously differentiable planning procedures that are sliic then we study properties such as balancedness cheatproofness with respect to coalitions neutrality individual rationality and we point out the connection with the mdp procedures

internet start ups access to the bank loan market evidence from italy the analysis of the bank sector s ability to efficiently fuel the birth of new italian business ventures in internet related services is studied in particular through the specification and the estimate of a series of econometric models this paper aims at investigating which characteristics of a large sample of internet start ups and their relative founders facilitate access to the loan market more precisely the role played by founders human capital as a possible significant signal used by banks to evaluate investment projects is addressed estimation results suggest that highly qualified human resources possessed by internet founders do not represent an important driver for gaining access to bank credit and they do not affect the amount of the incurred debt

what characterizes a fast growing firm this paper seeks to empirically identify factors that influence the probability of being a fast growing firm in eastern and western germany descriptive analyses have shown that most firms experience only small positive or negative employment growth or stagnate over time the job generation mechanism rests with a handful of firms that increase their employment significantly over time the empirical analysis shows that the probability of being a fast growing firm depends on different factors when separating eastern and western germany as well as using different definitions of fast growing firms moreover the analysis shows that technology intensive manufacturing branches and knowledge based business related services do not generate the majority of fast growing firms

a time to grow and a time to die growth and mortality of credit unions in new york city 1914 1990 one vision of organizational evolution suggests that old and large organizations become increasingly dominant over their environment a second suggests that as organizations age they become less able to respond to new challenges in this article the authors investigate which of these visions best characterizes the evolution of state chartered credit unions in new york city from 1914 through 1990 by analyzing the effects of organizational age size and population density on rates of organizational failure and growth the authors find evidence that old and small institutions are more likely to fail while young and small organizations have the highest growth rates

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

gibrat s law and quantile regressions an application to firm growth abstract the nexus between firm growth size and age in u s manufacturing is examined through the lens of quantile regression models this methodology allows us to overcome serious shortcomings entailed by linear regression models employed by much of the existing literature unveiling a number of important properties size pushes both low and high performing firms towards the median rate of growth while age is never advantageous and more so as firms are relatively small and grow faster these findings support theoretical generalizations of gibrat s law that allow size to affect the variance of the growth process but not its mean cordoba 2008

simulation of concentration development from modified gibrat growth entry exit processes gibrat s law is augmented to produce a more general stochastic model of concentration consisting of growth entry and exit processes empirical facts on growth entry and exit reported elsewhere are employed to calibrate the model which is then repeatedly simulated generating concentration data for 280 hypothetical industries grouped under fourteen types the simulated data are used to investigate the importance of growth entry and exit in shaping concentration development most important is systematic firm level growth entry and exit are much less significant as is random growth variability which features prominently in previous stochastic models parallels with previous interindustry research are drawn copyright 1995 by blackwell publishing ltd

comparative analysis of firm demographics and survival evidence from micro level sources in oecd countries in this paper we present cross country evidence on firm size distribution firm demographic and post entry performance for 10 oecd countries we use harmonized firm level data drawn from business registers or social security records these data enable international comparisons and the identification of idiosyncratic country effects while average firm size differs across countries due to both sectoral specialization and within sector characteristics we find similar degrees of firm churning across countries in most of them about 20 of firms enter and exit most markets every year and about 20 40 of entering firms fail within the first 2 years of life however post entry growth of successful entrants is much higher in the usa than in europe which may be indicative of barriers to firm growth as opposed to barriers to entry

ownership size and the formal structure of organizations evidence from us public and private firms 1992 2002 this study considers the effects of i ownership structure ii prior size dynamics of growth and decline and iii organizational size on changes in the formal structure of organizations using a broad sample of almost 70 000 us public and private firms i test the arguments by estimating conditional logistic regressions using as dependent variables two dimensions of organizational structural differentiation the number of formal subunits and hierarchical levels the findings show that public firms are more likely to elaborate structurally but less likely to simplify their structural differentiation as organizations grow decline in size they apparently tend to increase decrease their degree of structural differentiation however for a given change in size the level of structural differentiation is less likely to increase during growth than it is to decrease during decline indicating an asymmetric pattern i also find that organizational size can serve as a facilitator or inhibitor for structural change depending on the direction of change finally i find that the asymmetric pattern of growth and decline works differently for large and small firms the same proportional increase in size is more likely to generate structural differentiation for larger firms than for smaller firms but the same proportional decrease in size has a smaller likelihood of causing structural de differentiation for larger firms than for smaller firms copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

large risks limited liability and dynamic moral hazard we study a continuous time principal agent model in which a risk neutral agent with limited liability must exert unobservable effort to reduce the likelihood of large but relatively infrequent losses firm size can be decreased at no cost or increased subject to adjustment costs in the optimal contract investment takes place only if a long enough period of time elapses with no losses occurring then if good performance continues the agent is paid as soon as a loss occurs payments to the agent are suspended and so is investment if further losses occur accumulated bad performance leads to downsizing we derive explicit formulae for the dynamics of firm size and its asymptotic growth rate and we provide conditions under which firm size eventually goes to zero or grows without bounds

innovation firm size and growth in a centralized organization the optimal innovation firm size and growth are derived for a centrally controlled firm in which only the entrepreneur evaluates and restores current projects or evaluates and adopts new projects current projects are subject to failure due to entry and possible obsolescence while new projects may not be successful the optimal allocation of attention implies bounds on firm size and that the rate of innovation depends not only on monopoly profits firm size and technological opportunity but also on the probability of obsolescence the effects of monopoly power and firm size on innovation also depend on the degree of obsolescence

passive firm learning and employment projection error this paper analyzes establishment error in estimating employment targets in business startups and expansions passive firm learning models provide a testable hypothesis that other things being equal old establishments more accurately predict future employment targets than young businesses empirical evidence from 442 ohio establishments implies that an increase of ten years in establishment age is associated with a decrease in employment projection error rate of between 11 and 13 percentage points

pre entrepreneurial income cash flow growth and survival of startup businesses model and tests on u k data a target income human capital model of startup survival and growth is derived and tested the objective of the entrepreneur is to produce an independent source of income for him herself to replace income from previous employment target income is a function of pre entrepreneurial income and human capital represented by age the model predicts that higher pre income entrepreneurs and more mature individuals will grow faster to achieve these targets and that growth is an ambiguous function of size it also predicts that these same individuals and businesses that start larger will be more likely to survive the key results of the empirical analysis are that a businesses run by proprietors with higher pre entrepreneurial incomes do indeed grow faster than other startups but have no greater survival prospects and b businesses run by mature proprietors possess greater longevity we conclude that business income targets in practice constitute a significant motivation for startup growth and that the human capital represented by age plays no additional role however proprietor age rather than pre income determines survival despite the fact that pre income and age are positively correlated both with each other and with growth

entry and exit on the competitive fringe microeconomic theories of industry evolution reserve key roles for the entry and exit of firms competitive models of industry supply often assume that individual firms have ushaped long run average cost curves in consequence an industry s output adjustment in movement from one long run equilibrium to another is entirely accomplished through the entry and exit of firms rather than through changes in long run equilibrium output of individual firms in empirical applications the speed of movement to new equilibrium levels of output and price measured by the time it takes for profits to return to competitive levels following a demand shock clearly depends upon the ease of entry and exit however the simplest competitive models have a clear theoretical weakness abundant evidence against u shaped long run average cost curves precludes a simple identification of entry with industry expansion and exit with industry contraction expansion of industry supply can be met either by incumbents or entrants and we have little empirical evidence of the division entry conditions are also a staple of oligopoly and monopoly models potential entry constrains the pricing options open to industry leaders and actual entry of new firms and new products erodes at varying rates the market power of incumbent firms if actual entry responds rapidly to profit opportunities then the persistent exercise of monopoly power will be rare however analyses of monopoly and oligopoly models typically approach entry indirectly by inferring that persistent profit differentials reflect high barriers to entry there are few direct tests of the effects of such barriers on actual entry despite their importance very few empirical studies of entry and exit exist severe data limitations restrict both the number of studies and the scope of extant analyses the research reported in this paper provides measures of entry and exit in 46 food manufacturing industries during the 1976 82 period measures of incidence the number of firms as well as extent the size of firms are provided the analysis also distinguishes between diversified firms and specialist producers entry and exit rates vary considerably across industries and the paper reports the results of statistical analyses that account for industry differences in entry and exit rates by specialist firms

the survival and growth of new establishments in sweden 1987 1995 the aim of the study is to examine the survival of new establishments and to identify factors affecting their survival probability and their employment growth this study uses a unique data set on all new establishments that were created in sweden 1987 and 1988 with the exception of the construction industry the results show among others that i new establishments face a high risk of closing down ii the probability of establishment survival increases with the age and size of the establishment iii variables that are assumed to measure access to resources being a part of a multi unit firm and being new due to merger or dispersal have a positive effect on survival iv the number of employees at the start up year has a negative effect on the employment growth and v demographic and educational factors are important in explaining survival and growth

a theory of financing constraints and firm dynamics there is widespread evidence supporting the conjecture that borrowing constraints have important implications for firm growth and survival in this paper we model a multiperiod borrowing lending relationship with asymmetric information we show that borrowing constraints emerge as a feature of the optimal long term lending contract and that such constraints relax as the value of the borrower s claim to future cash flows increases we also show that the optimal contract has interesting implications for firm dynamics in agreement with the empirical evidence as age and size increase mean and variance of growth decrease and firm survival increases

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

dynamic procedures and incentives in public good economies in this paper we consider economies involving one public good one private good and convex technology and propose an informationally decentralized dynamic nontatonnement procedure that converges in general from the initial endowments to an allocation in the core of the economy we then consider a general class of procedures and show that there exists none in the class that is locally incentive compatible and individually rational these results show that there exists a trade off between the requirements of local incentive compatibility and equitable cost sharing

differences in the rates of return to r d for european and us young leading r d firms this paper examines the sources of europe s lagging business r d performance relative to the us particularly the role played by missing young leading innovators in high technology intensive sectors in europe it investigates through econometric analysis differences in the rates of return to r d of european and us large r d firms it finds that while in the us young firms succeed in realizing significantly higher rates of return to r d as compared to their older counterparts including in high tech sectors european firms fail to generate significant rates of return even if they are yollies and even if they are in high tech sectors these findings can at least partly explain why europe has less r d intensive young leading innovators in high technology intensive sectors

theory and practice of decentralized planning procedures the paper surveys the theory of decentralized planning procedures dealing with price guided quantity guided and mixed procedures informational and incentive properties of the various procedures are dealt with as is the problem of public goods the practice of planning in the u s s r hungary and india is also discussed copyright 1990 by blackwell publishers ltd

long lasting bank relationships and growth of firms a puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank independent firms in this paper we reconsider the link between relationship lending and firm growth distinguishing firms by size and expansion contraction conditions the idea is that the beneficial effects of relationship lending on information asymmetries can be compensated by other negative capture risk and externality effects which make relational banks reluctant to support long term growth projects of client firms and that the strength of these compensating effects varies with firm size and health status we explore the influence of long lasting bank relationships on employment and asset growth of a large sample of italian firms the main finding is that relationship lending hampers the efforts of small firms to increase their size while it mitigates the negative growth of troubled medium large enterprises

reconciling quantile autoregressions of firm size and variance size scaling the aim of this paper is to understand what economic mechanisms may cause the law of proportionate effect to break down for fast growing and shrinking firms recent evidence has highlighted that the first order coefficients of quantile auto regression of firm size decline across quantiles our theoretical results show that negative variance size scaling is sufficient to yield a decline in quantile auto regression coefficients if firm log size is laplace distributed conditional on size one period ahead however it is sufficient only for declining auto regression coefficients for fast growing firms under asymmetric laplace conditional log size if skewness is decreasing with size in other words if the growth of large firms is less dispersed and more left skewed size is a disadvantage for the growth of fast growers but not necessarily an advantage for fast decliners thus size related determinants of negative growth skewness such as diseconomies of growth market power and managerial attention issues impact on how the lpe is violated using data on dutch manufacturing companies from the business register of enterprises observed between 1994 and 2004 our empirical estimates of quantile regression models confirm the evidence of declining quantile regression coefficients for small medium firms 20 199 employees mainly in the right most quantiles and for the same subsample we find that growth rates variance and skewness are decreasing with size the theoretical propositions of the paper are thus corroborated

optimal lending contracts and firm dynamics we develop a general model of lending in the presence of endogenous borrowing constraints borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced in the model the dynamics of debt are closely linked with the dynamics of borrowing constraints in fact borrowing constraints must satisfy a dynamic consistency requirement the value of outstanding debt restricts current access to short term capital but is itself determined by future access to credit this dynamic consistency is not guaranteed in models of exogenous borrowing constraints where the ability to raise short term capital is limited by some prespecified function of debt we characterize the optimal default free contract which minimizes borrowing constraints at all histories and derive implications for firm growth survival leverage and debt maturity the model is qualitatively consistent with stylized facts on the growth and survival of firms comparative statics with respect to technology and default constraints are derived borrowing constraints are an important determinant of firm growth and survival 1 such constraints may arise in connection to the financing of investment opportunities faced by firms or temporary liquidity needs such as those required to survive a recession this paper develops a theory of endogenous borrowing constraints and studies its implications for firm dynamics in our model debt is constrained by the firm s limited liability and option to default a lending contract specifies an initial loan size future financing and a repayment schedule the choice of these variables in turn determines future growth the firm s future borrowing capacity and its ability and willingness to repay hence borrowing constraints and firm dynamics are jointly determined we study this dynamic design problem our model builds on thomas and worral s 1994 model of foreign direct investment at time zero a risk neutral borrower firm or entrepreneur has a project which requires a fixed initial set up cost every period the project yields revenues that increase with the amount of 1 there is considerable evidence suggesting that financing constraints are important determinants of firm dynamics gertler and gilchrist 1994 argue that liquidity constraints may explain why small manufacturing firms respond more to a tightening of monetary policy than do larger manufacturing firms perez quiros and timmermann 2000 show that in recessions smaller firms are more sensitive to the worsening of credit market conditions as measured by higher interest rates and default premia evans and jovanovic 1989 show that the liquidity constraints are essential in the decision to become an entrepreneur fazzari hubbard and petersen 1988 among others view financial constraints as an explanation for the dynamic behaviour of aggregate investment and cabral and mata 1996 are able to fit reasonably well the size distribution of portuguese manufacturing firms by estimating a simple model of financing constraints for surveys see hubbard 1998 and stein 2003

incentive compatibility without compensation abstract standard public good mechanisms rely on a transferable medium of compensation to overcome incentive compatibility constraints groves laffont if no such medium exists and information is incomplete the available rules with satisfactory welfare and incentice compatibility properties require a unidimensional set of alternatives we define a dynamic procedure for two dimensional economies that is pareto optimal and individually rational with incentives as those of rules exploiting compensatory transfers

profitability transactional alignment and organizational mortality in the u s trucking industry the winds of creative destruction rarely blow more fiercely than in a newly deregulated environment managers simultaneously face a novel focus on operating efficiency and an onslaught of new competitors what must managers do to enable their firms to survive in such an environment what factors bear on firms survival this paper presents an analysis of mortality of large motor carriers in the u s interstate for hire trucking industry after deregulation it examines this phenomenon through a multidisciplinary lens that encompasses organizational ecology neoclassical economics and transaction cost economics the paper posits that carrier mortality is a function of both firm level and industry level attributes which are drawn from both ecological and economic theories while each of these theories separately informs motor carrier mortality the inclusion of predictions derived from both disciplines in one model significantly increases explanatory power over either theory evaluated alone the empirical analysis is among the first to show increased mortality when firms do not adhere to operating policies consistent with transaction cost minimization principles in sum managers are well advised to adopt a multidisciplinary approach to strategy to ensure their firms survival 1997 by john wiley sons ltd

cross sectoral variation in the volatility of plant level idiosyncratic shocks the volatility of plant level idiosyncratic shocks we estimate the volatility of plant level idiosyncratic shocks in u s manufacturing we measure the variation in revenue total factor productivity not explained by either industry or economy wide factors or by establishments characteristics we find that idiosyncratic shocks are much larger than aggregate shocks accounting for about 80 of the overall uncertainty faced by plants plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile we provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater

employment and smes during crises the persistent increasing duration of unemployment has become an issue during economic crises although lay offs at large firms normally make headlines during crises we still know little about the potential impact of firm size on adjustment behavior in a crisis we studied effects of firm size on employment growth during economic slowdowns using a rich microeconomic database for the 1988 2007 period in portuguese manufacturing industry the results show that economic downturns affect firm growth negatively this negative effect is found to be higher for larger firms both during and immediately following crisis periods small and medium sized enterprises smes emerge as potential stabilizers in downturn periods however larger firms seem to be able to quickly recover from downturn periods our results contribute to the scarce literature and to the understanding of the portuguese case where many smes secure most jobs these first results may be useful because smes play a determinant role in other european union economies

the financial conditions for swedish smes survey and research agenda this paper shows that in two important sectors of swedish industry in the early 1990s the existence of finance demand internally generated constraints in addition to the familiar finance supply externally generated constraints on businesses are a significant empirical phenomenon firms are aware that relinquishing some control would improve performance however the returns in growth profits and survival are not sufficient to offset the utility of control loss owners of younger firms especially in business services regard very favourably the added expertise of new preferably angel equity holders with one in three such firms having actively sought new owners equity finance is therefore to be regarded as a package from the viewpoint of the smaller firm with transfer of management skills from venture capitalist to firm sweetening the bitter pill of control loss

industrial dynamics and economic geography capasso m stam e and cefis e industrial dynamics and economic geography regional studies how do industries emerge and evolve over space in this special issue the fields of industrial dynamics and economic geography are brought together in order to achieve a richer and more fundamental understanding of the organization of industries over time and space than each of these fields could do separately firm heterogeneity at the micro level and industry composition of a region at the macro level provide important elements in the explanation of industry emergence and evolution over space history and space matter in the evolution of industries this special issue shows how and why