Small Business Economics

, Volume 43, Issue 4, pp 823–837 | Cite as

Age and firm growth: evidence from three European countries

  • Giorgio Barba Navaretti
  • Davide Castellani
  • Fabio Pieri
Article

Abstract

This article provides new insights into the dependence of firm growth on age along the entire distribution of growth rates, and conditional on survival. Using data from the European firms in a global economy survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than ten employees in the period from 2001 to 2008. We find that: (1) young firms grow faster than old firms, especially in the highest growth quantiles; (2) young firms face the same probability of declining as their older counterparts; (3) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity and the financial structure; (4) high growth is associated with younger chief executive officers and other attributes that capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries.

Keywords

Firm growth Age Quantile regression 

JEL Classifications

L21 L25 L26 L60 

References

  1. Arrighetti, A., & Ninni, A. (2009). Firm size and growth opportunities: A survey. Working paper 05/2009, Department of Economics, University of Parma, Parma.Google Scholar
  2. Barba Navaretti, G., Castellani, D., & Pieri, F. (2013). Age and firm growth. Evidence from three European countries. CIRCLE EWP.Google Scholar
  3. Baum, J. R., Locke, E. A., & Smith, K. G. (2001). A multidimensional model of venture growth. Academy of Management Journal, 44(2), 292–303.CrossRefGoogle Scholar
  4. Bottazzi, G., Grazzi, M., Secchi, A., & Tamagni, F. (2011). Financial and economic determinants of firm default. Journal of Evolutionary Economics, 21, 373–406.CrossRefGoogle Scholar
  5. Bravo-Biosca, A. (2011). A look at business growth and contraction in Europe. NESTA Working Paper No. 11/02, London.Google Scholar
  6. Coad, A. (2007a). Testing the principle of ‘growth of the fitter’: The relationship between profits and firm growth. Structural Change and Economic Dynamics, 18(3), 370–386.CrossRefGoogle Scholar
  7. Coad, A. (2007b). Firm growth: A survey, papers on economics and evolution, 0703. Jena: Max Planck Institute of Economics.Google Scholar
  8. Coad, A. (2010). Investigating the exponential age distribution of firms. Economics the Open Access Open Assessment E Journal 4, 2010-17 doi:http://dx.doi.org/10.5018/economics-ejournal.ja.2010-17.
  9. Coad, A., & Rao, R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37, 633–648.CrossRefGoogle Scholar
  10. Coad, A., Segarra, A., & Teruel, M. (2013). Like milk or wine: Does firm performance improve with age? Structural Change and Economic Dynamics, 24, 173–189.CrossRefGoogle Scholar
  11. Coad, A., & Tamvada, J. P. (2008). The growth and decline of small firms in developing countries, papers on economics and evolution, 0808. Jena: Max Planck Institute of Economics.Google Scholar
  12. Cooley, T. F., & Quadrini, V. (2004). Financial markets and firm dynamics. American Economic Review, 91, 1286–1310.CrossRefGoogle Scholar
  13. Coucke, K., Pennings, E., & Sleuwaegen, L. (2007). Employee layoff under different modes of restructuring: Exit, downsizing and relocation. Industrial and Corporate Change, 16(2), 161–182.CrossRefGoogle Scholar
  14. Cucculelli, M., & Ermini, B. (2012). Risk attitude, product innovation, and firm growth. Evidence from Italian manufacturing firms. Economics Letters, 118(2), 275–279.CrossRefGoogle Scholar
  15. Daunfeldt, S.-O., & Elert, N. (2013). When is Gibrat’s law a law? Small Business Economics, 41(1), 133–147.CrossRefGoogle Scholar
  16. Dosi, G., Marsili, O., Orsenigo, L., & Salvatore, R. (1995). Learning, market selection and evolution of industrial structures. Small Business Economics, 7, 411–436.CrossRefGoogle Scholar
  17. Dunne, T., Roberts, M., & Samuelson, L. (1988). Patterns of firm entry and exit in the U.S. manufacturing industries. Rand Journal of Economics, 19(4), 495–515.CrossRefGoogle Scholar
  18. Dunne, T., Roberts, M., & Samuelson, L. (1989). The growth and failure of U.S. manufacturing plants. Quarterly Journal of Economics, 104(4), 671–698.CrossRefGoogle Scholar
  19. Ericson, R., & Pakes, A. (1995). Markow-perfect industry dynamics: A framework for empirical work. Review of Economic Studies, 62, 53–82.CrossRefGoogle Scholar
  20. Evans, D. S. (1987a). The relationship between firm growth, size and age: Estimates for 100 manufacturing industries. Journal of Industrial Economics, 35, 567–581.CrossRefGoogle Scholar
  21. Evans, D. S. (1987b). Tests of alternative theories of firm growth. Journal of Political Economy, 95(4), 657–674.CrossRefGoogle Scholar
  22. Fariñas, J. C., & Moreno, L. (2000). Firms’ growth, size and age: A nonparametric approach. Review of Industrial Organization, 17, 249–265.CrossRefGoogle Scholar
  23. Fizaine, F. (1968). Analyse statistique de la croissance des entreprises selon l’âge et la taille. Revue d’Economie Politique, 78, 606–620.Google Scholar
  24. Geroski, P., & Gugler, K. (2004). Corporate growth and convergence in Europe. Oxford Economic Papers, 56, 597–620.CrossRefGoogle Scholar
  25. Hall, B. H. (1987). The relationship between firm size and firm growth in the U.S. manufacturing sector. Journal of Industrial Economics, 35(4), 583–600.CrossRefGoogle Scholar
  26. Haltiwanger, J. C., Jarmin, R. S., & Miranda, J. (2010). Who creates jobs? Small VS. large VS. Young. NBER Working Paper no. 16300, Cambridge, MA.Google Scholar
  27. Hart, P. E. (2000). Theories of firms’ growth and the generation of jobs. Review of Industrial Organization, 17, 229–248.CrossRefGoogle Scholar
  28. Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica, 50, 649–670.CrossRefGoogle Scholar
  29. Koenker, R. (2005). Quantile regression, econometric society monograph series. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
  30. Lee, N. (2011). Free to grow? Assessing the barriers faced by actual and potential high growth firms. NESTA Working Paper No. 11/01, London.Google Scholar
  31. Liu, J., Tsou, M., & Hammitt, J. K. (1999). Do small plants grow faster? Evidence from the Taiwan electronics industry. Economics Letters, 65, 121–129.CrossRefGoogle Scholar
  32. López-García, P., & Puente, S. (2012). What makes a high-growth firm in Spain? A dynamic probit analysis using firm-level data. Small Business Economics, 39(2), 1029–1041.CrossRefGoogle Scholar
  33. Lotti, F., Santarelli, E., & Vivarelli, M. (2003). Does Gibrat’s law hold among young, small firms? Journal of Evolutionary Economics, 13, 213–234.CrossRefGoogle Scholar
  34. Lotti, F., Santarelli, E., & Vivarelli, M. (2009). Defending Gibrat’s law as a long-run regularity. Small Business Economics, 32, 31–44.CrossRefGoogle Scholar
  35. Nelson, R., & Winter, S. (1982). An evolutionary theory of economic change. Cambridge, MA: Harvard University Press.Google Scholar
  36. Pakes, A., & Ericson, R. (1998). Empirical implications of alternative models of firm dynamics. Journal of Economic Theory, 79, 1–45.CrossRefGoogle Scholar
  37. Penrose, E. T. (1959). The theory of the growth of the firm. Oxford: Oxford University Press.Google Scholar
  38. Reichstein, T., Dahl, M. S., Ebersberger, B., & Jensen, M. B. (2010). The devil dwells in the tails. A quantile regression approach to firm growth. Journal of Evolutionary Economics, 20, 219–231.CrossRefGoogle Scholar
  39. Serrasquiero, Z., Maçãs Nunes, P., Leitão, J., & Armada, M. (2010). Are there non-linearities between SME growth and its determinants? A quantile approach. Industrial and Corporate Change, 19, 1071–1108.CrossRefGoogle Scholar
  40. Stenholm, P., & Toivonen, J. (2009). The attributes of firm growth—why and why not a firm does grow. Frontiers of Entrepreneurship Research, 29, 1–15.Google Scholar
  41. Wagner, J. (1992). Firm size, firm growth, and persistence of chance: Testing Gibrat’s law with establishment data from lower saxony, 1978–1989. Small Business Economics, 4(2), 125–131.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Giorgio Barba Navaretti
    • 1
  • Davide Castellani
    • 2
  • Fabio Pieri
    • 3
  1. 1.Department of Economics, Management and Quantitative Methods, University of MilanCentro Studi Luca d’AglianoMilanItaly
  2. 2.Department of EconomicsCentro Studi Luca d’Agliano, CIRCLE and IWHPerugiaItaly
  3. 3.Departamento de Estructura Economica (Economia Aplicada II)Universitat de ValenciaValenciaSpain

Personalised recommendations