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Productivity, market selection, and corporate growth: comparative evidence across US and Europe

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  • Giovanni Dosi
  • Daniele Moschella
  • Emanuele Pugliese
  • Federico Tamagni

Abstract

This paper analyses the patterns of market selection in manufacturing industries of France, Germany, UK, and USA. We first disentangle the contribution to industry-level productivity growth of within-firm productivity changes and between-firm reallocation of shares. The evidence corroborates the notion that within-firm learning prevails over market selection forces, with larger firms driving such innovation and learning processes. Second, we address the “strength” of selection by exploring to what extent firm growth rates are shaped by relative productivity levels as compared to variation thereof. Our key finding is that, although changes in relative efficiency have a greater impact on growth than relative efficiency levels, there is an overall weak relationship between productivity and growth and, therefore, a weak power of selection forces in all countries. The results hold across firms of different size, but we also find that selection bites more on SMEs. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Giovanni Dosi & Daniele Moschella & Emanuele Pugliese & Federico Tamagni, 2015. "Productivity, market selection, and corporate growth: comparative evidence across US and Europe," Small Business Economics, Springer, vol. 45(3), pages 643-672, October.
    • Handle: RePEc:kap:sbusec:v:45:y:2015:i:3:p:643-672
    DOI: 10.1007/s11187-015-9655-z
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    More about this item

    Keywords

    Firm heterogeneity; Productivity decomposition; Corporate growth; Market selection; Learning; Firm–industry dynamics; C23; D22; L10; L20; O47;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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