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Going Through a Crisis: Firm Devekopment and Firm SIze Distributions

Christian Cordes, Tong-Yaa Su and Pontus Strimling
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Tong-Yaa Su: University of Bremen, Faculty of Business Studies and Economics, Hochschulring 4, 28359 Bremen, Germany
Pontus Strimling: Maelardalen University, Department of Mathematics and Physics, Hoegskoleplan 1, Rosenhill, Vaesteas, Sweden

No 2015-06, Papers on Economics and Evolution from Philipps University Marburg, Department of Geography

Abstract: This paper relates firm-level processes and size distributions of firms at the industry level. An analytically tractable model explores how firm growth, exit, and spinoff activity in combination with systematically appearing growth crises in organizational development translate into specific steady-state firm size distributions (FSDs). Based on anthropological, social-psychological, and economic evidence on the effects of increasing group size on performance, the model features a critical organizational size that triggers these growth crises. Together, these processes generate empirically observable size distributions of firms including right-skewed and Pareto distributions as well as self-reinforcing spinoff processes that affect an industry’s FSD.v

Keywords: Firm Size Distribution; Firm Growth; Critical Firm Size; Industry Evolution (search for similar items in EconPapers)
JEL-codes: C61 D21 L11 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-12-16
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