Growth Processes of Italian Manufacturing Firms

Alex Coad (), Rekha Rao-Nicholson and Federico Tamagni

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

Abstract: This paper presents a multidimensional empirical analysis of firm growth. Exploiting census data on Italian manufacturing firms, 1989-1997, we estimate a reduced-form VAR to analyze the co-evolution of employment growth, sales growth, growth of profits and labour productivity growth. Our main findings suggest that (i) employment growth precedes sales growth; (ii) productivity growth lacks any strong association with subsequent growth of the other indicators; (iii) profits growth represents the `absorbing dimension' of the growth processes. This picture contrasts with 'accelerator models', predicting sales are the driver of the growth process, and is also at odds with theories of firm-industry evolution assuming productivity or profits advantages to be the driver of strong market selection/reallocation mechanisms. Instead, the findings reveal the existence of (weak) Penrose and (strong) Kaldor-Verdoorn effects, and more generally convey the view that employment growth is the key driver of firm expansion, while profits, once made, are not reinvested.

Keywords: Household Consumption Expenditure; Budget Shares; Sum of Log-Normal Distributions (search for similar items in EconPapers)
Date: 2008-10-02
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Growth processes of Italian manufacturing firms (2011)
Working Paper: Growth Processes of Italian Manufacturing Firms (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2008/20

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