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Growth patterns of professional services firms

Edouard Ribes ()
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Edouard Ribes: CERNA i3 - Centre d'économie industrielle i3 - CNRS - Centre National de la Recherche Scientifique - PSL - PSL Research University - MINES ParisTech - École nationale supérieure des mines de Paris

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Abstract: Based on data collected by the US Census, this paper proposes an investigation of the firm level dynamics inherent to the professional services industry. I show that PSFs do not follow Gibrat's law but that their growth speed is increasing and convex in size. This translates into asymptotically linear transformation costs with size. But size is not the only key feature that has to be considered to explain PSFs growth. I show that PSFs are subject to a maturation process with age that is crystallized by their distribution across the marketplace as well as their margin structure. This aspect of PSFs is then compared to other industrial sectors and a possible interpretation for this behavior in terms of employee sorting is proposed.

Keywords: Firm growth; Professional Services Firms; Learning; Firm performance; Employee Selection; Transformation Costs; Mean Field Games (search for similar items in EconPapers)
Date: 2018-04-10
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Handle: RePEc:hal:wpaper:hal-01762381