Firm size and optimal growth rates

The size variance relationship of business firm growth rates.

The relationship between the size and the variance of firm growth rates is known to follow an approximate power-law behavior sigma(S) approximately S(-beta(S)) where S is the firm size and beta(S) approximately 0.2 is an exponent that weakly depends on S. Here, we show how a model of proportional growth, which treats firms as classes composed of various numbers of units of variable size, can ex...

Internal Rent-Seeking and Optimal Firm Size∗

This paper discusses the optimal firm size in the presence of internal rent seeking. Since firm size has a discouragement effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects — together with technological considerations — determines whether the employer chooses an inefficiently small or large firm size. ...

Extreme Fluctuations in U.S. Firm Growth Rates

We describe several important features of annual firm growth rate dynamics. Specifically, we report three major findings, some of which were previously known for certain subsets of U.S. firms and are here shown to obtain for the entire universe of U.S. business firms, and others that are apparently novel. First, the distribution of log growth rates overall are well-characterized by the so-calle...

Financial fragility and the distribution of firm growth rates

Analyzing a comprehensive database of limited liability manufacturing firms this paper investigates the relation between a firm’s financial situation and its conditional expected growth rate. Specifically, using quantile regressions, we obtain a quantitative characterization of this relation for different quantiles of the growth rates distribution. We find that simple location-shift models, as ...

Does Firm Size Matter for Growth and Poverty Alleviation?