Explaining the distribution of firm growth rates | Zendy

Bottazzi Giulio | Zendy; Secchi Angelo | Zendy

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Explaining the distribution of firm growth rates

Author(s) -

Bottazzi Giulio,

Secchi Angelo

Publication year - 2006

Publication title -

the rand journal of economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 3.687

H-Index - 108

eISSN - 1756-2171

pISSN - 0741-6261

DOI - 10.1111/j.1756-2171.2006.tb00014.x

Subject(s) - limiting , infinity , econometrics , distribution (mathematics) , exponential growth , exponential function , exponential distribution , economics , empirical evidence , asymptotic distribution , mathematics , statistics , mathematical analysis , engineering , mechanical engineering , philosophy , epistemology , estimator

Empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates. We present clear‐cut evidence on this topic using disaggregated data. We explain the observed regularities proposing a model in which firms' ability to take up new business opportunities increases with the number of opportunities already exploited. A theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity. Moreover, using simulations, we show that even in a small industry the agreement with asymptotic results is almost complete .

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