Corporate performances and market selection. Some comparative evidence

Giulio Bottazzi, Giovanni Dosi, Nadia Jacoby, Angelo Secchi and Federico Tamagni

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

Abstract: Diverse theories of industry dynamics predict heterogeneity in production efficiency to be the driver of firms' growth, survival and industrial change, either through a direct link between efficiency and growth, or through an indirect effect via profitabilities, as more productive firms can enjoy higher profit margins which, under imperfect capital markets, allow them to invest and grow more. Does the empirical evidence bear such predictions? This paper explores the dynamics of selection and reallocation through an investigation of the productivity-profitability-growth relations at the firm level. Exploiting large panels of Italian and French industrial firms, we find that heterogeneity in efficiencies primarily yield persistent profitability differentials, whereas the relationships of corporate growth with either productivity or profitability appear much weaker, if at all existent. This suggests that selection forces are much less strong than usually assumed. Rather, the links between efficiency and corporate growth seem profoundly mediated by large degrees of behavioural freedom. The results robustly applies across different industrial sectors and across the two countries.

Keywords: firms heterogeneity; corporate growth; productivity; profitability; market selection; cross-country comparisons (search for similar items in EconPapers)
JEL-codes: C14 D20 L10 L20 O47 (search for similar items in EconPapers)
Date: 2009-09-29
New Economics Papers: this item is included in nep-eff and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Corporate performances and market selection: some comparative evidence (2010)
Working Paper: Corporate performances and market selection. Some comparative evidence (2010)
Working Paper: Corporate performances and market selection. Some comparative evidence (2010)
Working Paper: Corporate performances and market selection. Some comparative evidence (2009)
Working Paper: Corporate performances and market selection. Some comparative evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2009/13

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