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A critical human group size and firm size distributions in industries

  • Christian CordesEmail author
  • Tong-Yaa SuEmail author
  • Pontus Strimling
Article
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Abstract

Initially taking a theoretical stance, this paper relates firm-level processes and size distributions of firms at the industry level. An analytically tractable model explores how firm growth, exit, and spinoff activity in combination with systematically appearing growth crises in organizational development translate into specific firm size distributions (FSDs). Based on anthropological, social-psychological, and economic evidence on the effects of increasing group size on performance, the model features a critical organizational size that triggers growth crises. These processes generate size distributions of firms including different right-skewed distributions observed in the empirical literature and self-reinforcing spinoff processes that affect an industry’s FSD.

Keywords

Firm growth Critical group size Firm size distributions Industry evolution 

JEL

L11 D21 C61 

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Authors and Affiliations

  1. 1.Faculty of Business Studies and EconomicsUniversity of BremenBremenGermany
  2. 2.Institute for Future Studies, Stockholm and Centre for Studies of Cultural EvolutionStockholm UniversityStockholmSweden

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