The Nature of Firm Growth

By Benjamin W. Pugsley, Petr Sedlácek, Vincent Sterk. The American Economic Review, 2017

162 citations recorded by the source corpus.

About one-half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex ante heterogeneity rather than persistent ex post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) helps understand the recently documented decline in business dynamism by showing a disappearance of high-growth startups (“gazelles”) since the mid-1980s. (JEL D22, D24, E24, J23, L11, M13)

Subfields: Economics and Econometrics, Management of Technology and Innovation, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/edf88c1117a1f539d749aedd73f94d2865a31e97