Gibrat's Law in the “Third Italy”: Firm Growth in the Veneto Region

Roberta Piergiovanni

Growth and Change, 2010, vol. 41, issue 1, 28-58

Abstract: According to Gibrat's Law of Proportionate Effect, the growth rate of a given firm is independent of its size at the beginning of the period examined. While earlier studies tended to confirm the Law, more recent research generally rejects it. The aim of this paper is to test whether Gibrat's Law is confirmed, for the 1995–2005 period, for a large sample of firms active in the Veneto region of Italy. Controlling for firm age and size, findings show that the Law is not confirmed in the early stages of a firm's life cycle, with younger firms growing faster than established ones, whereas it cannot be rejected once a given threshold in terms of age is reached. These findings are consistent with the life cycle theory of the firm and with the hypothesis that fast growing small and medium‐sized enterprises may have played a role in the evolution and the structural transformation of local systems in the “Third Italy” during the 1990s and early 2000s.

Date: 2010
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