EconPapers    
Economics at your fingertips  
 

Sunk Costs, Firm Size and Firm Growth

Luis Cabral

Journal of Industrial Economics, 1995, vol. 43, issue 2, 161-72

Abstract: For several decades, the conventional wisdom has been that expected firm growth rates are independent of firm size, a property known as Gibrat's Law. However, recent empirical work has found a negative relation between firm growth and firm size. This paper provides a theoretical explanation for this negative relation in a model of new firm growth where capacity and technology choices involve some degree of sunkness. Additional empirical implications of the theory of sunk costs are also developed. These relate to profit rates, Tobin's Q, exit rates, degree of sunkness of capacity costs, as well as size and growth rates. Copyright 1995 by Blackwell Publishing Ltd.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (119)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1821%2819950 ... 0.CO%3B2-B&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:43:y:1995:i:2:p:161-72

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-19
Handle: RePEc:bla:jindec:v:43:y:1995:i:2:p:161-72