Growth Processes of Italian Manufacturing Firms

Alex Coad (), Rekha Rao () and Federico Tamagni ()

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: We propose a multidimensional empirical analysis of the growth processes of firms, focusing on the coevolution of employment growth, sales growth, growth of profits and labour productivity growth. Based on firm level data about Italian manufacturing firms, 1989-1997, we apply a reduced-form vector autoregression model to analyze the lead-lag associations between the different dimension of firm growth. Findings suggest that employment growth precedes sales growth and growth of profits, and that sales growth is also associated with subsequent profits growth. There appears to be little feedback of either sales or profits on employment growth, however, and there is no clear association of employment, sales or profits growth with subsequent changes in labour productivity. Productivity growth, in turn, is more strongly associated with subsequent growth of profits than it does with subsequent growth of either employment or sales. Growth of profits, therefore, tends to represent the absorbing dimension of the overall processes of firm growth. Quantile regressions reveal asymmetries between growth processes for growing and shrinking firms.

Keywords: Household Consumption Expenditure; Budget Shares; Sum of Log-Normal Distributions (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff and nep-ent
Date: 2008-10-02
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Working Paper: Growth Processes of Italian Manufacturing Firms (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:ssa:lemwps:2008/20

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