Persistence in firm growth: inference from conditional quantile transition matrices

Giulio Bottazzi, Taewon Kang and Federico Tamagni
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Taewon Kang: Scuola Superiore Sant’Anna

Small Business Economics, 2023, vol. 61, issue 2, No 14, 745-770

Abstract: Abstract We introduce a new methodology to investigate the degree of persistence in firm growth dynamics, based on Conditional Quantile Transition Probability Matrices (CQTPMs) and exact inferential tests derived from two well-known mobility indexes. We apply the methodology to study manufacturing firms in the UK and four major European economies over the period 2010–2017. We find that CQTPMs display more persistence than under a fully independent firm growth process, albeit considerable turbulence and significant bouncing effects are detected. Exploiting the inferential statistics within a regression framework, we show that productivity, openness to trade, and business dynamism are the primary sources of firm growth persistence across sectors, while country-specific and time-specific factors play a second-order role.

Keywords: Firm growth persistence; Transition matrices; Mobility indexes; Non-parametric statistics (search for similar items in EconPapers)
JEL-codes: C14 D22 L25 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11187-022-00700-y

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