Stochastic Selection and Evolution

Market selection process determines the survival of firms in an industry and their growth or decay. What are the factors which affect the selection process? Does size matter, that is, do small firms grow faster than large firms? Since investment decisions for output growth involve uncertainty and irreversibility, the resulting unit costs are only partially known. Future demand is also uncertain. Do the stochastic factors affect the selection process in a significant way? Does risk aversion play a significant role in firm’s decisions to invest (disinvest) and expand (contract) its size?