IDEAS home Printed from https://ideas.repec.org/p/hhs/huiwps/0112.html
   My bibliography  Save this paper

Bursting into life: Firm growth and growth persistence by age

Author

Listed:
  • Coad, Alex

    (University of Sussex)

  • Daunfeldt, Sven-Olov

    (HUI Research)

  • Halvarsson, Daniel

    (Ratio)

Abstract

Is firm growth more persistent for young or old firms? Theory gives us no clear answer, and previous empirical investigations have been hampered by a lack of detailed data on firm age, as well as a non-representative coverage of young firms. We overcome these shortcomings using a rich dataset on all limited liability firms in Sweden during 1997-2010, covering firms of all ages and information on registered start year. We find that sales growth for new ventures is characterized by positive persistence, whereas it quickly turns negative and remains negative as firms get older. It thus seems that the growth paths of older firms are buffeted around by environmental turbulence, and that older firms may have challenges in adapting their strategies to changing market conditions, whereas new firms experience an early burst of sustained growth.

Suggested Citation

  • Coad, Alex & Daunfeldt, Sven-Olov & Halvarsson, Daniel, 2015. "Bursting into life: Firm growth and growth persistence by age," HUI Working Papers 112, HUI Research.
    • Handle: RePEc:hhs:huiwps:0112
    as

    Download full text from publisher

    File URL: http://www.hui.se/BinaryLoader.axd?OwnerID=3a577059-d869-4d1b-bff1-5673eefc3461&OwnerType=0&PropertyName=EmbeddedFile_2ac53e55-d2fd-4645-9186-ade18bc46fa6&FileName=HUIwp112.pdf&Attachment=True
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alex Coad & Max Planck, 2012. "Firms as Bundles of Discrete Resources – Towards an Explanation of the Exponential Distribution of Firm Growth Rates," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 38(2), pages 189-209.
    2. Georgios Fotopoulos & Helen Louri, 2004. "Firm Growth and FDI: Are Multinationals Stimulating Local Industrial Development?," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 163-189, September.
    3. Giulio Bottazzi & Alex Coad & Nadia Jacoby & Angelo Secchi, 2011. "Corporate growth and industrial dynamics: evidence from French manufacturing," Applied Economics, Taylor & Francis Journals, vol. 43(1), pages 103-116.
    4. Robson, Paul J A & Bennett, Robert J, 2000. "SME Growth: The Relationship with Business Advice and External Collaboration," Small Business Economics, Springer, vol. 15(3), pages 193-208.
    5. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    6. Timothy B. Folta & Frédéric Delmar & Karl Wennberg, 2010. "Hybrid Entrepreneurship," Management Science, INFORMS, vol. 56(2), pages 253-269, February.
    7. Alex Coad, 2009. "The Growth of Firms," Books, Edward Elgar Publishing, number 13424.
    8. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    9. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    10. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2009. "Defending Gibrat’s Law as a long-run regularity," Small Business Economics, Springer, vol. 32(1), pages 31-44, January.
    11. Davidsson, Per & Steffens, Paul & Fitzsimmons, Jason, 2009. "Growing profitable or growing from profits: Putting the horse in front of the cart?," Journal of Business Venturing, Elsevier, vol. 24(4), pages 388-406, July.
    12. Anonymous, 2014. "Introduction to the Issue," Journal of Wine Economics, Cambridge University Press, vol. 9(1), pages 1-2, May.
    13. Benjamin L. Collier & Andrew F. Haughwout & Howard C. Kunreuther & Erwann O. Michel‐Kerjan, 2020. "Firms’ Management of Infrequent Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(6), pages 1329-1359, September.
    14. Chesher, Andrew, 1979. "Testing the Law of Proportionate Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 27(4), pages 403-411, June.
    15. Goddard, John & Wilson, John & Blandon, Peter, 2002. "Panel tests of Gibrat's Law for Japanese manufacturing," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 415-433, March.
    16. Martina Lawless, 2014. "Age or size? Contributions to job creation," Small Business Economics, Springer, vol. 42(4), pages 815-830, April.
    17. Cabral, Luis, 1995. "Sunk Costs, Firm Size and Firm Growth," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 161-172, June.
    18. Alex Coad & Julian Frankish & Paul Nightingale & Richard Roberts, 2014. "Business experience and start-up size: Buying more lottery tickets next time around?," Small Business Economics, Springer, vol. 43(3), pages 529-547, October.
    19. Sven-Olov Daunfeldt & Daniel Halvarsson, 2015. "Are high-growth firms one-hit wonders? Evidence from Sweden," Small Business Economics, Springer, vol. 44(2), pages 361-383, February.
    20. Alexander McKelvie & Johan Wiklund, 2010. "Advancing Firm Growth Research: A Focus on Growth Mode Instead of Growth Rate," Entrepreneurship Theory and Practice, , vol. 34(2), pages 261-288, March.
    21. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the distribution of firm growth rates," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 235-256, June.
    22. Alex Coad & Werner Hölzl, 2009. "On the Autocorrelation of Growth Rates," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 139-166, June.
    23. Alex Coad, 2007. "A Closer Look at Serial Growth Rate Correlation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(1), pages 69-82, August.
    24. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    25. Yongsung Chang & Joao F. Gomes & Frank Schorfheide, 2002. "Learning-by-Doing as a Propagation Mechanism," American Economic Review, American Economic Association, vol. 92(5), pages 1498-1520, December.
    26. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    27. Werner Hölzl, 2014. "Persistence, survival, and growth: a closer look at 20 years of fast-growing firms in Austria," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(1), pages 199-231, February.
    28. Ryan Decker & John Haltiwanger & Ron Jarmin & Javier Miranda, 2014. "The Role of Entrepreneurship in US Job Creation and Economic Dynamism," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 3-24, Summer.
    29. Delmar, Frederic & Davidsson, Per & Gartner, William B., 2003. "Arriving at the high-growth firm," Journal of Business Venturing, Elsevier, vol. 18(2), pages 189-216, March.
    30. Dunne, Paul & Hughes, Alan, 1994. "Age, Size, Growth and Survival: UK Companies in the 1980s," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 115-140, June.
    31. Garnsey, Elizabeth, 1998. "A Theory of the Early Growth of the Firm," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 7(3), pages 523-556, September.
    32. Alex Coad & Sven-Olov Daunfeldt & Werner Hölzl & Dan Johansson & Paul Nightingale, 2014. "High-growth firms: introduction to the special section," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(1), pages 91-112, February.
    33. Anonymous, 2014. "Introduction to the Issue," Journal of Wine Economics, Cambridge University Press, vol. 9(2), pages 109-110, August.
    34. Coad, Alex & Rao, Rekha, 2008. "Innovation and firm growth in high-tech sectors: A quantile regression approach," Research Policy, Elsevier, vol. 37(4), pages 633-648, May.
    35. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
    36. Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2014. "Age and firm growth: evidence from three European countries," Small Business Economics, Springer, vol. 43(4), pages 823-837, December.
    37. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 671-698.
    38. Bamford, Charles E. & Dean, Thomas J. & Douglas, Thomas J., 2004. "The temporal nature of growth determinants in new bank foundings: implications for new venture research design," Journal of Business Venturing, Elsevier, vol. 19(6), pages 899-919, November.
    39. Simon Parker & David Storey & Arjen Witteloostuijn, 2010. "What happens to gazelles? The importance of dynamic management strategy," Small Business Economics, Springer, vol. 35(2), pages 203-226, September.
    40. Toke Reichstein & Michael Dahl & Bernd Ebersberger & Morten Jensen, 2010. "The devil dwells in the tails," Journal of Evolutionary Economics, Springer, vol. 20(2), pages 219-231, April.
    41. Elena Huergo & Jordi Jaumandreu, 2004. "How Does Probability of Innovation Change with Firm Age?," Small Business Economics, Springer, vol. 22(3_4), pages 193-207, April.
    42. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    43. Coad, Alex & Frankish, Julian & Roberts, Richard G. & Storey, David J., 2013. "Growth paths and survival chances: An application of Gambler's Ruin theory," Journal of Business Venturing, Elsevier, vol. 28(5), pages 615-632.
    44. Toke Reichstein & Michael S. Dahl & Bernd Ebersberger, & Morten Jensen, 2006. "The Devil Dwells in the Tails A Quantile Regression Approach to Firm Growth," DRUID Working Papers 06-34, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    45. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
    46. Alex Coad & Julian S. Frankish & Richard G. Roberts & David J. Storey, 2016. "Predicting new venture survival and growth: Does the fog lift?," Small Business Economics, Springer, vol. 47(1), pages 217-241, June.
    47. Marco Capasso & Elena Cefis & Koen Frenken, 2014. "On the existence of persistently outperforming firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(4), pages 997-1036.
    48. Ajit Singh & Geoffrey Whittington, 1975. "The Size and Growth of Firms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(1), pages 15-26.
    49. Almus, Matthias & Nerlinger, Eric A, 2000. "Testing "Gibrat's Law" for Young Firms--Empirical Results for West Germany," Small Business Economics, Springer, vol. 15(1), pages 1-12, August.
    50. Sven-Olov Daunfeldt & Niklas Elert & Dan Johansson, 2014. "The Economic Contribution of High-Growth Firms: Do Policy Implications Depend on the Choice of Growth Indicator?," Journal of Industry, Competition and Trade, Springer, vol. 14(3), pages 337-365, September.
    51. Takehiko Yasuda, 2005. "Firm Growth, Size, Age and Behavior in Japanese Manufacturing," Small Business Economics, Springer, vol. 24(1), pages 1-15, December.
    52. Parker,Simon C., 2006. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521030632, September.
    53. Jerker Denrell & Christina Fang & Chengwei Liu, 2015. "Perspective—Chance Explanations in the Management Sciences," Organization Science, INFORMS, vol. 26(3), pages 923-940, June.
    54. Dean Shepherd & Johan Wiklund, 2009. "Are we Comparing Apples with Apples or Apples with Oranges? Appropriateness of Knowledge Accumulation across Growth Studies," Entrepreneurship Theory and Practice, , vol. 33(1), pages 105-123, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daria Ciriaci & Pietro Moncada-Paternò-Castello & Peter Voigt, 2016. "Innovation and job creation: a sustainable relation?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 189-213, August.
    2. Alex Coad & Werner Hölzl, 2012. "Firm Growth: Empirical Analysis," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 24, Edward Elgar Publishing.
    3. Canarella, Giorgio & Miller, Stephen M., 2018. "The determinants of growth in the U.S. information and communication technology (ICT) industry: A firm-level analysis," Economic Modelling, Elsevier, vol. 70(C), pages 259-271.
    4. Erhardt, Eva Christine, 2018. "Firm performance after high growth: A comparison of absolute and relative growth measures," MPRA Paper 88077, University Library of Munich, Germany.
    5. Sven-Olov Daunfeldt & Daniel Halvarsson, 2015. "Are high-growth firms one-hit wonders? Evidence from Sweden," Small Business Economics, Springer, vol. 44(2), pages 361-383, February.
    6. Silviano Esteve-Pérez & Fabio Pieri & Diego Rodriguez, 2022. "One swallow does not make a summer: episodes and persistence in high growth," Small Business Economics, Springer, vol. 58(3), pages 1517-1544, March.
    7. Erhardt, Eva, 2017. "Who persistently creates jobs? Absolute versus relative high-growth firms," MPRA Paper 79307, University Library of Munich, Germany.
    8. Alex Coad & Marc Cowling & Josh Siepel, 2017. "Growth processes of high-growth firms as a four-dimensional chicken and egg," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(4), pages 537-554.
    9. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
    10. Daunfeldt, Sven-Olov & Halvarsson, Daniel & Mihaescu, Oana, 2015. "High-growth firms: Not so vital after all?," HUI Working Papers 114, HUI Research.
    11. Bartoloni, Eleonora & Baussola, Maurizio & Bagnato, Luca, 2020. "Waiting for Godot? Success or failure of firms’ growth in a panel of Italian manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 259-275.
    12. Daniele Moschella & Federico Tamagni & Xiaodan Yu, 2019. "Persistent high-growth firms in China’s manufacturing," Small Business Economics, Springer, vol. 52(3), pages 573-594, March.
    13. Florian Leon, 2019. "The elusive quest for high- growth firms in Africa: The (lack of) growth persistence in Senegal," Working Papers hal-02493326, HAL.
    14. Alex Coad, 2022. "Lumps, Bumps and Jumps in the Firm Growth Process," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 18(4), pages 212-267, April.
    15. Marco Capasso & Elena Cefis & Alessandro Sapio, 2013. "Reconciling quantile autoregressions of firm size and variance–size scaling," Small Business Economics, Springer, vol. 41(3), pages 609-632, October.
    16. Goedhuys-Degelin M.D.L. & Sleuwaegen L., 2015. "Human capital, innovation and the distribution of firm growth rates," MERIT Working Papers 2015-013, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    17. Eva Christine Erhardt, 2021. "Measuring the persistence of high firm growth: choices and consequences," Small Business Economics, Springer, vol. 56(1), pages 451-478, January.
    18. Florian Léon, 2022. "The elusive quest for high-growth firms in Africa: when other metrics of performance say nothing," Small Business Economics, Springer, vol. 58(1), pages 225-246, January.
    19. Sven-Olov Daunfeldt & Niklas Elert, 2013. "When is Gibrat’s law a law?," Small Business Economics, Springer, vol. 41(1), pages 133-147, June.
    20. 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.

    More about this item

    Keywords

    firm age; growth rate autocorrelation; sales growth; learning-by-doing; minimum efficient scale;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:huiwps:0112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hans Seerar Westerberg (email available below). General contact details of provider: https://edirc.repec.org/data/huistse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.