The Growth of Business Firms: Theoretical Framework and Empirical Evidence

Dongfeng Fu, Fabio Pammolli (), Sergey V. Buldyrev, Massimo Riccaboni (), Kaushik Matia, Kazuko Yamasaki and H. Eugene Stanley

MPRA Paper from University Library of Munich, Germany

Abstract: We introduce a model of proportional growth to explain the distribution of business firm growth rates. The model predicts that it is exponential in the central part and depicts an asymptotic power-law behavior in the tails with an exponent ζ = 3. Because of data limitations, previous studies in this field have been focusing exclusively on the Laplace shape of the body of the distribution. In this article, we test the model at different levels of aggregation in the economy, from products to firms to countries, and we find that the model’s predictions agree with empirical growth distributions and size-variance relationships.

Keywords: proportional growth; preferential attachment; Laplace distribution (search for similar items in EconPapers)
JEL-codes: D21 L25 O47 D39 E01 L00 L60 L65 L16 E17 (search for similar items in EconPapers)
Date: 2005
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Published in Proceedings of the National Academy of Sciences 52.102(2005): pp. 18801-18806

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Working Paper: The Growth of Business Firms: Theoretical Framework and Empirical Evidence (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:15905

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