The nature of firm growth

Benjamin Pugsley, Petr Sedlacek and Vincent Sterk

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Only half of all startups survive past the age of ve and surviving businesses grow at vastly di erent speeds. Using micro data on employment in the population of U.S. businesses, we estimate that the lion's share of these differences is driven by ex-ante heterogeneity across fi rms, rather than by ex-post shocks. We embed such heterogeneity in a fi rm dynamics model and study how ex-ante differences shape the distribution of fi rm size, "up-or-out" dynamics, and the associated gains in aggregate output. "Gazelles" - a small subset of startups with particularly high growth potential - emerge as key drivers of these outcomes. Analyzing changes in the distribution of ex-ante fi rm heterogeneity over time reveals that gazelles are driven towards extinction, creating substantial aggregate losses.

Keywords: firm dynamics; startups; macroeconomics; big data (search for similar items in EconPapers)
JEL-codes: E23 E24 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2017-11
New Economics Papers: this item is included in nep-ent, nep-mac, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://eprints.lse.ac.uk/87173/ Open access version. (application/pdf)

Related works:
Journal Article: The Nature of Firm Growth (2021)
Working Paper: The Nature of Firm Growth (2018)
Working Paper: The Nature of Firm Growth (2018)
Working Paper: The Nature of Firm Growth (2017)
Working Paper: The Nature of Firm Growth (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:87173

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