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Age and firm growth: evidence from three European countries

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.

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Notes

  1. EFIGE is the acronym for “European Firms in a Global Economy: internal policies for external competitiveness,” a project funded by the European Union under the FP7 framework.

  2. From a theoretical point of view, this is also in line with evolutionary tradition of growth of the fitter (Nelson and Winter 1982; Dosi et al. 1995).

  3. We cross-refer the reader to the latest working paper version of this work (Barba Navaretti et al. 2013) for more information on representativeness of the Amadeus-EFIGE sample used in the empirical analyses.

  4. In Barba Navaretti et al. (2013), we also present evidence on the average growth rate over the entire 2001–2008 period.

  5. This fact can also be appreciated by observing the steeper shape of the French ‘tent’ around the modal value equal to zero. See Barba Navaretti et al. (2013) for a discussion of the specific dynamics observed in each country.

  6. We cross-refer the reader to the “Appendix” (Table 7) for further information on how variables included in the analysis have been built.

  7. See Barba Navaretti et al. (2013) for more details on the theoretical motivations regarding the choice of the explanatory variables.

  8. This is consistent with the descriptive evidence provided in Sect. 3 regarding the younger age and smaller size of Spanish firms with respect to their older French and Italian counterparts.

  9. To save space and given the similarity of results with respect to the estimations over the entire sample, country-specific results are not shown, but are available upon request.

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Acknowledgments

The authors wish to thank two anonymous referees for their useful remarks. Comments from Agustí Segarra, Mercedes Teruel and participants at seminars and conferences in Castellón (January 2012), Valencia (Dpto. de Economia Aplicada II, April 2012; IVIE, October 2012), A Coruña (XV Encuentros de Economía Aplicada, June 2012), Tarragona (Workshop on Firm Growth and Innovation, June 2012) and Palma de Mallorca (March 2013) are also greatly appreciated. The usual disclaimer applies. Fabio Pieri greatly acknowledges the financial support of the Spanish Ministry of Science and Innovation (project MINECO ECO2011-27619 co-financed with FEDER). This article was completed within the EFIGE project (contract no. 225551) funded by the European Commission under the Seventh Framework Programme.

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Correspondence to Fabio Pieri.

Appendix: definition of explanatory variables

Appendix: definition of explanatory variables

See (Table 7).

Table 7 Variables included in the analysis: definitions

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Barba Navaretti, G., Castellani, D. & Pieri, F. Age and firm growth: evidence from three European countries. Small Bus Econ 43, 823–837 (2014). https://doi.org/10.1007/s11187-014-9564-6

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Keywords

  • Firm growth
  • Age
  • Quantile regression

JEL Classifications

  • L21
  • L25
  • L26
  • L60