Innovation and Corporate Dynamics: A Theoretical Framework

Massimo Riccaboni (), Jakub Growiec and Fabio Pammolli ()

MPRA Paper from University Library of Munich, Germany

Abstract: We provide a detailed analysis of a generalized proportional growth model (GPGM) of innovation and corporate dynamics that encompasses the Gibrat’s Law of Proportionate Effect and the Simon growth process as particular instances. The predictions of the model are derived in terms of (i) firm size distribution, (ii) the distribution of firm growth rates, and (iii-iv) the relationships between firm size and the mean and variance of firm growth rates. We test the model against data from the worldwide pharmaceutical industry and find its predictions to be in good agreement with empirical evidence on all four dimensions.

Keywords: Business firm size; firm growth distribution; Gibrat’s Law; Pareto distribution; lognormal distribution, size-variance relationship. (search for similar items in EconPapers)
JEL-codes: C49 L11 L25 L65 (search for similar items in EconPapers)
Date: 2011-03-26
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-sbm and nep-tid
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Citations: View citations in EconPapers (4)

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Journal Article: Innovation and Corporate Dynamics: A Theoretical Framework (2020)
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