Firm Size Distribution and Growth*

Patrizio Pagano () and Fabiano Schivardi

Scandinavian Journal of Economics, 2003, vol. 105, issue 2, 255-274

Abstract: Abstract Empirical documentation of the sectoral distribution of firm size for a set of European countries reveals substantial differences. We study the relationship between productivity growth at the industry level and size structure. A positive and robust relation is found between average firm size and growth. We ask why size should matter for growth by considering the role of innovation to construct a test based on the differential effect of size on growth according to various indicators of R&D intensity. Our results indicate that larger size fosters productivity growth because it allows firms to take advantage of all the increasing returns associated with R&D. We argue that our test can be interpreted as a test of reverse causality, which lends support to the view that firm size has a causal impact on growth.

Date: 2003
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Citations: View citations in EconPapers (154)

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https://doi.org/10.1111/1467-9442.t01-1-00008

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Working Paper: Firm Size Distribution and Growth (2001)
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