Business Intelligence

Framing The Empirical Findings On Firm Growth

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Executive Summary

This paper proposes a general framework to account for the divergent results in the empirical literature on the relation between firm sizes and growth rates, and on many results on growth autocorrelation. In particular, the authors provide an explanation for why traces of the LPE sometimes occur in conditional mean autoregressions of firm size or firm growth, and in conditional median (i.e. least absolute deviation) autoregressions, but never in high or low quantile autoregressions. Based on an original empirical analysis of the population of manufacturing firms in the Netherlands between 1994 and 2004, they find that there is no peculiar role played by the median of the growth distribution, which is approximately equal to zero independent of firm size.

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