Growth and size of firms

Peter E. Hart and Nicholas Oulton ()

No 77, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: This paper uses a dataset of some 87,000 independent UK companies, the great majority small to medium size, to investigate the relationship between firm size and firm growth. Three measures of size are considered: employment, sales and net assets. Growth over 1, 2 and 4 years is examined, using the Galtonian model of regressive towards the mean. For the sample as a whole we find strong support for regression towards the mean: that is, growth is negatively related to initial size and proportionately more new jobs are created by small firms than by large firms. However, when the sample is broken down by size group, we find that regression towards the mean only occurs for the smallest firms, e.g. those with less than 8 employees. For larger firms, there is essentially no relationship between growth and size. Even for the smallest firms, the results may be due to transitory factors. Contact NIESR if copy required

Date: 1995-02
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:77

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