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The Firm Size Distribution and Inter-Industry Diversification

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We show that the stylized facts of the Firm Size Distribution (FSD) by age cohorts, as shown in Cabral and Mata (2003), bind within 4-digit manufacturing industries in the UK and Belgium. As in Klepper and Thompson (2006) and Sutton (1998), we explore whether time to build a portfolio of products is a mechanism that relates age to firm size. While inter industry diversification, to some extent, accounts for the role of age, we find that the presence of economies of scope has a separate impact on firm size when controlling for age, amongst other factors. Using the techniques in Cabral and Mata's we show that the FSD by degrees of product diversification shifts to the right, but more so in older age groups. This shows a role for inter-industry diversification over and above an age effect.
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  • John Hutchinson & Jozef Konings & Patrick Walsh, 2010. "The Firm Size Distribution and Inter-Industry Diversification," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(2), pages 65-82, September.
    • Handle: RePEc:kap:revind:v:37:y:2010:i:2:p:65-82
    DOI: 10.1007/s11151-010-9260-x
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    1. Buzzacchi, Luigi & Valletti, Tommaso M., 2006. "Firm size distribution: Testing the "independent submarkets model" in the Italian motor insurance industry," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 809-834, July.
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    Cited by:

    1. Johannes Boehm & Swati Dhingra & John Morrow, 2022. "The Comparative Advantage of Firms," Journal of Political Economy, University of Chicago Press, vol. 130(12), pages 3025-3100.
    2. repec:spo:wpecon:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    3. Antonio Palestrini, 2015. "Firm Size Distribution and the Survival Bias," Economics Bulletin, AccessEcon, vol. 35(3), pages 1630-1637.
    4. Christos Axioglou & Nicos Christodoulakis, 2021. "Which firms survive in a crisis? Investigating Gibrat’s Law in Greece 2001–2014," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(2), pages 159-217, June.
    5. repec:hal:spmain:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    6. Johannes Boehm & Swati Dhingra & John Morrow, 2019. "The Comparative Advantage of Firms," Sciences Po publications 2019-07, Sciences Po.
    7. repec:hal:wpspec:info:hdl:2441/1dn2prktaq9p3949il1h9ds86b is not listed on IDEAS
    8. Gemunu Nanayakkara & Lokman Mia, 2016. "Does product diversification and emphasis on profitability in microfinancing alleviate poverty?," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 23(1), pages 21-56, June.

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    More about this item

    Keywords

    Firm age; Firm size distribution; Inter-industry diversification; L10; L11; L16;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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