Small Business Economics

, Volume 44, Issue 4, pp 889–904 | Cite as

Firm growth in the course of mergers and acquisitions

  • Dirk BurghardtEmail author
  • Marco Helm


This paper examines the effect of mergers and acquisitions on employment growth in newly acquired firm establishments. Based on a unique full sample of manufacturing and services firms in Switzerland, our main finding is that the relative size of a deal is an important growth determinant: While the initial size of the acquiring firm is positively related to an acquired establishment’s growth, the opposite holds true for the initial size of the acquisition. We also contribute to a controversial debate on firm growth in general by rejecting Gibrat’s law of proportionate growth for firm establishments in Switzerland. In fact, employment growth decreases with an establishment’s initial size and age—at the aggregate level as well as within separate subsamples of manufacturing and services firms.


Firm growth Employment Gibrat’s law Mergers and acquisitions Deal size Establishment-level data Switzerland 

JEL Classifications:

G34 L11 L25 M51 L26 



We thank Stefan Buehler, Simon Evenett, Christina Felfe, Klaus Gugler, Giovanni Mellace, Farzad Saidi, Philip Schuster, Conny Wunsch, two anonymous referees, as well as seminar participants at the University of St. Gallen, ETH Zurich, the Swiss IO Day 2010 (Bern), the IIOC 2011 (Boston), and the EEA-ESEM Congress 2011 (Oslo) for helpful comments. We also thank the Swiss Federal Statistical Office for providing their Business Census data through Contracts No. 08350 and 140146. Financial support from the Swiss National Science Foundation through Grants No. PP0011-114754 and PBSGP1-138787 is gratefully acknowledged.


  1. Almus, M., & Nerlinger, E. A. (2000). Testing Gibrat’s Law for young firms: Empirical results for West Germany. Small Business Economics, 15(1), 1–12. doi: 10.1023/A:1026512005921.Google Scholar
  2. Andrade, G., Mitchell, M., & Stafford, E. (2001). New evidence and perspectives on mergers. Journal of Economic Perspectives, 15(2), 103–120. doi: 10.1257/jep.15.2.103.Google Scholar
  3. Audretsch, D. B., Klomp, L., Santarelli, E., & Thurik, R. (2004). Gibrat’s Law: Are the services different? Review of Industrial Organization, 24(3), 301–324. doi: 10.1023/ Scholar
  4. Berk, R. A., Western, B., & Weiss, R. E. (1995). Statistical inference for apparent populations. Sociological Methodology, 25, 421–458. doi: 10.2307/271073.Google Scholar
  5. Bhagat, S., Shleifer, A., Vishny, R. W., Jarrel, G., & Summers, L. (1990). Hostile takeovers in the 1980s: The Return to corporate specialization. brookings papers on economic activity. Microeconomics, 1990, 1–84. doi: 10.2307/2534780.Google Scholar
  6. Blonigen, B. A., & Tomlin, K. S. (2001). Size and growth of Japanese plants in the United States. International Journal of Industrial Organization, 19(6), 931–952. doi: 10.1016/S0167-7187(99)00055-7.Google Scholar
  7. Brown, C., & Medoff, J. L. (1988). The impact of firm acquisitions on labor. In A. J. Auerbach (Ed.), Corporate takeovers: Causes and consequences. Chicago: University of Chicago Press.Google Scholar
  8. Buehler, S., Kaiser, C., & Jaeger, F. (2005). Competition policy and exit rates: Evidence from Switzerland. Contributions in Economic Analysis and Policy, 4(1), 1–28. doi: 10.2202/1538-0645.1444.Google Scholar
  9. Carpenter, R. E., & Petersen, B. C. (2002). Is the growth of small firms constrained by internal finance? Review of Economics and Statistics, 84(2), 298–309. doi: 10.1162/003465302317411541.Google Scholar
  10. Conyon, M. J., Girma, S., Thompson, S., & Wright, P. W. (2002). The impact of mergers and acquisitions on company employment in the United Kingdom. European Economic Review, 46(1), 31–49. doi: 10.1016/S0014-2921(00)00086-6.Google Scholar
  11. Daunfeldt, S.-O., & Elert, N. (2013). When is Gibrat’s Law a law? Small Business Economics, 41(1), 133–147. doi: 10.1007/s11187-011-9404-x.Google Scholar
  12. Dunne, P., & Hughes, A. (1994). Age, size, growth and survival: UK companies in the 1980s. Journal of Industrial Economics, 42(2), 115–140. doi: 10.2307/2950485.Google Scholar
  13. Dunne, T., Roberts, M. J., & Samuelson, L. (1989). The growth and failure of U.S. manufacturing plants. Quarterly Journal of Economics, 104(4), 671–698. doi: 10.2307/2937862.Google Scholar
  14. Evans, D. S. (1987a). The relationship between firm growth, size, and age: Estimates for 100 manufacturing industries. Journal of Industrial Economics, 35(4), 567–581. doi: 10.2307/2098588.Google Scholar
  15. Evans, D. S. (1987b). Tests of alternative theories of firm growth. Journal of Political Economy, 95(4), 657–674. doi: 10.1086/261480.Google Scholar
  16. Fotopoulos, G., & Giotopoulos, I. (2010). Gibrat’s Law and persistence of growth in Greek manufacturing. Small Business Economics, 35(2), 191–202. doi: 10.1007/s11187-008-9163-5.Google Scholar
  17. Geroski, P., & Gugler, K. (2004). Corporate growth convergence in Europe. Oxford Economic Papers, 56(4), 597–620. doi: 10.1093/oep/gpf055.Google Scholar
  18. Gibrat, R. (1931). Les inegalites economiques. Paris: Recueil sirey.Google Scholar
  19. Green, M. B., & Cromley, R. G. (1982). The horizontal merger: Its motives and spatial employment impacts. Economic Geography, 58(4), 358–370. doi: 10.2307/143460.Google Scholar
  20. Görg, H., & Greenaway, D. (2004). Much ado about nothing? Do domestic firms really benefit from foreign direct investment? World Bank Research Observer, 19(2), 171–197. doi: 10.1093/wbro/lkh019.Google Scholar
  21. Görg, H., & Strobl, E. (2005). Spillovers from foreign firms through worker mobility: An empirical investigation. Scandinavian Journal of Economics, 107(4), 693–709. doi: 10.1111/j.1467-9442.2005.00427.x.Google Scholar
  22. Gugler, K., & Yurtoglu Burcin, B. (2004). The effects of mergers on company employment in the USA and Europe. International Journal of Industrial Organization, 22(4), 481–502. doi: 10.1016/j.ijindorg.2003.12.003.Google Scholar
  23. Hall, B. H. (1987). The relationship between firm size and firm growth in the US manufacturing sector. Journal of Industrial Economics, 35(4), 583–606. doi: 10.2307/2098589.Google Scholar
  24. Harhoff, D., Stahl, K., & Woywode, M. (1998). Legal form, growth and exit of West German firms: Empirical results for manufacturing, construction, trade and service industries. Journal of Industrial Economics, 46(4), 453–488. doi: 10.1111/1467-6451.00083.Google Scholar
  25. Hoogstra, G. J., & van Dijk, J. (2003). Explaining firm employment growth: Does location matter? Small Business Economics, 22(3–4), 179–192. doi: 10.1023/ Scholar
  26. Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica, 50(3), 649–670. doi: 10.2307/1912606.Google Scholar
  27. Lensink, R., van Steen, P., & Sterken, E. (2005). Uncertainty and growth of the firm. Small Business Economics, 24(4), 381–391. doi: 10.1007/s11187-005-7121-z.Google Scholar
  28. Lichtenberg, F. R., & Siegel, D. (1990). The effect of ownership changes on the employment and wages of central office and other personnel. Journal of Law and Economics, 33(2), 383–408. doi: 10.1086/467210.Google Scholar
  29. Lotti, F., Santarelli, E., & Vivarelli, M. (2003). Does Gibrat’s Law hold among young, small firms? Journal of Evolutionary Economics, 13(3), 213–235. doi: 10.1007/s00191-003-0153-0.Google Scholar
  30. McGuckin, R. H., & Nguyen, S. V. (2001). The impact of ownership changes: A view from labor markets. International Journal of Industrial Organization, 19(5), 739–762. doi: 10.1016/S0167-7187(00)00092-8.Google Scholar
  31. Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725. doi: 10.1111/1468-0262.00467.Google Scholar
  32. Nunes, P. M., Gonçalves, M., & Serrasqueiro, Z. (2013). The influence of age on SMEs’ growth determinants: Empirical evidence. Small Business Economics, 40(2), 249–272. doi: 10.1007/s11187-011-9363-2.Google Scholar
  33. Oliviera, B., & Fortunato, A. (2006). Firm growth and liquidity constraints: A dynamic analysis. Small Business Economics, 27(2–3), 139–156. doi: 10.1007/s11187-006-0006-y.Google Scholar
  34. Reid, G. C., & Xu, Z. (2012). Generalising Gibrat: Using Chinese evidence founded on fieldwork. Small Business Economics, 39(4), 1017–1028. doi: 10.1007/s11187-011-9338-3.Google Scholar
  35. Robson, P. J. A., & Bennett, R. J. (2000). SME growth: The relationship with business advice and external collaboration. Small Business Economics, 15(3), 193–208. doi: 10.1023/A:1008129012953.Google Scholar
  36. Sutton, J. (1997). Gibrat’s legacy. Journal of Economic Literature, 35(1), 40–59.Google Scholar
  37. Swiss Federal Statistical Office. (2006). Betriebszählung 2005. Grundlagen und Methoden. Neuchâtel: Bundesamt für Statistik (BFS).
  38. Teece, D. J. (1986). Profiting from Technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy, 15(6), 285–305. doi: 10.1016/0048-7333(86)90027-2.Google Scholar
  39. Teruel-Carrizosa, M. (2010). Gibrat’s Law and the learning process. Small Business Economics, 34(4), 355–373. doi: 10.1007/s11187-008-9127-9.Google Scholar
  40. Yasuda, T. (2005). Firm growth, size, age and behavior in Japanese manufacturing. Small Business Economics, 24(1), 1–15. doi: 10.1007/s11187-005-7568-y.Google Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of St. GallenSt. GallenSwitzerland
  2. 2.Secretariat of the Swiss Competition CommissionBernSwitzerland

Personalised recommendations