Past and possible future of economic firm level data analysis / von Alexander Preuss

Firm size and firm growth rates are important economic measures which affect people’s live around the world. The reasons for firm entry, growth and exit are influencing employment levels, their understanding is therefore crucial to make economic predictions and give policy advices. This thesis reviewed in a first step the existing literature on firm size and growth. The basic work of Robert Gibrat on the Law of Proportional Effect was discussed, as well as several other explanatory approaches like the Bound approach by Herbert Simon, the learning model of Jovanovic and a popular paper summarizing the historical literature by John Sutton. Provided with the theoretical foundation, empirical studies on important influencers on firm size and growth were introduced. First, a study on European multinational firms showed that firm size has a negative impact on growth and thus do not support Gibrat’s law of proportional effect. It further showed that firm age has a negative impact on growth and that growth rates differ between industries. Second, studies performed on Portuguese and Italian firms also did not support Gibrat’s law, showing a highly right skewed distribution which gets flatter with firm age. Furthermore, it was shown that financial constraints are strongest for young entrepreneurs as well as for young firms, that financially constrained firms have on average less employees and show a lower growth rate than firms that are not financially constrained. Third, the important fields of globalization and productivity, related to concepts of comparative advantage, monopolistic competition, import/export, foreign direct investment and M&A were discussed in detail. It was shown that an integrated (globalized) market leads to a reduction in the total number of firm, to increased competition and thus higher requirements on the productivity levels of individual firms. Further empirical studies showed that selection and learning effects account for observed import and export patterns, showing that according to a firm’s productivity level, different trading strategies are chosen. All potential influencers of firm size and growth that were introduced were summarized in a comprehensive table at the end of Chapter 3. The last chapter of this work applied the introduced concepts and potential influencers to existing OECD and Eurostat data sources. Available variables of several data sources have been reviewed and were used to perform new analysis on firm size and growth. Productivity calculations based on the OECD Structural Demographic Business Statistics data base outlined that productivity levels across Europe are highly heterogeneous, also differing by firm size classes and sectors. Furthermore, the OECD data showed that the size distribution for various sectors is highly right skewed, again showing notably differences between the sectors. Eurostat data were used to calculate firm survival rates across European countries, showing that the oneto fiveyear survival rates differ strongly between countries. Finally, the work covers future economic perspectives. Therefore an Eurostat survey, including 25 000 firms in 20 member states, was