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The growth opportunities for SMC?

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  • Jan Bentzen
  • Erik Madsen
  • Valdemar Smith

Abstract

The extensive empirical literature on the validity of Gibrat's law does not in general verify the law as it finds that firms’ growth rates are negatively correlated with both firm size and age. However, some studies find that Gibrat's law holds for sub‐samples of firms such as large firms or firms belonging to special industries. It has been pointed out that these results are due to the fact that the likelihood of firm survival for natural reasons is positively related to firm size and age. This study uses a relatively large and representative sample of Danish firms to evaluate the validity of Gibrat's law for different kinds of firms over the period 1990 ‐ 2003. In contrast to the majority of earlier studies our analysis corrects for the bias in the estimations by using variables related to the survival of small firms.

Suggested Citation

  • Jan Bentzen & Erik Madsen & Valdemar Smith, 2006. "The growth opportunities for SMC?," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 7(3), pages 139-145.
    • Handle: RePEc:taf:jbemgt:v:7:y:2006:i:3:p:139-145
    DOI: 10.1080/16111699.2006.9636134
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    References listed on IDEAS

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    1. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    2. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    3. Peter Hart & Nicholas Oulton, 1999. "Gibrat, Galton and Job Generation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(2), pages 149-164.
    4. repec:nsr:niesrd:77 is not listed on IDEAS
    5. Blonigen, Bruce A. & Tomlin, KaSaundra, 2001. "Size and growth of Japanese plants in the United States," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 931-952, May.
    6. Geroski, Paul, 2003. "The Evolution of New Markets," OUP Catalogue, Oxford University Press, number 9780199248896.
    7. J. O. S. Wilson & J. E. MORRIS, 2000. "The Size and Growth of UK Manufacturing and Service Firms," The Service Industries Journal, Taylor & Francis Journals, vol. 20(2), pages 25-38, April.
    8. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-1252, September.
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    Cited by:

    1. Stephanie Reitzinger & Astrid Pennerstorfer, 2021. "The size–growth relationship in the social services sector in Austria," Service Business, Springer;Pan-Pacific Business Association, vol. 15(3), pages 445-466, September.
    2. Jan Bentzen & Erik Madsen & Valdemar Smith, 2012. "Do firms’ growth rates depend on firm size?," Small Business Economics, Springer, vol. 39(4), pages 937-947, November.

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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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