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Explaining the Distribution of Firms Growth Rates

Giulio Bottazzi and Angelo Secchi

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: Empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of the corporate growth rates. We present clearcut evidence on this topic using disaggregated data. We explain the observed regularities proposing a model in which the firmsÂ’ ability of taking up new business opportunities increases with the number of opportunities already exploited. A theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity. Moreover, using simulations, we show that even in a small industry the agreement with asymptotic results is almost complete.

Keywords: Firm Growth; Laplace Distribution; Urn Processes (search for similar items in EconPapers)
Date: 2005-07-15
New Economics Papers: this item is included in nep-bec, nep-com and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Journal Article: Explaining the distribution of firm growth rates (2006) Downloads
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