Skip to main content
SpringerLink
Log in

Firm size, firm growth, and persistence of chance: Testing GIBRAT's law with establishment data from Lower Saxony, 1978–1989

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

Using data for some 7000 manufacturing establishments from Lower Saxony for 1978–1989 we tested for the validity of GIBRAT's Law of Proportionate Growth. We found that the law is only valid for very few groups of firms in some of the periods covered. However, we did not find that small firms grew systematically faster or slower than larger firms, or vice versa. On the other hand, we found ‘persistence of chance’ in the sense that a firm grows faster if it happened to grow faster in the past, too.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • AcsZoltan J. and David B.Audretsch, 1990a, Innovation and Small Firms, Cambridge, Massachusetts: The MIT Press.

    Google Scholar 

  • Acs, Zoltan J. and David B. Audretsch, 1990b, ‘Small Firms and Entrepreneurship: A Comparison between West and East Countries’, Discussion Paper FS IV 90-13, Wissen-schaftszentrum Berlin für Sozialforschung.

  • Bourlakis, Constantine A., 1990, ‘Probability of Survival and Firm Growth in Greek Manufacturing Industries’, Paper presented at the 17th Annual Conference of the European Association for Research in Industrial Economics, mimeo, University of Leeds.

  • ChesterAndrew, 1979, ‘Testing the Law of Proportionate Effect’, Journal of Industrial Economics XXVII (4), 430–411.

    Google Scholar 

  • ContiniBruno and RiccardoRevelli, 1989, ‘The Relationship Between Firm Growth and Labor Demand’, Small Business Economics 1(4), 309–314.

    Google Scholar 

  • Dunne, Paul and Alan Hughes, 1990, ‘Small Firms: Age, Growth and Survival in the 1980's’, Paper presented at the 17th Annual Conference of the European Association for Research in Industrial Economics, mimeo, Cambridge University.

  • DunneTimothy, Mark J.Roberts, and LarrySamuelson, 1989, ‘The Growth and Failure of U.S. Manufacturing Plants’, Quarterly Journal of Economics 104(4), 671–698.

    Google Scholar 

  • EvansDavid S., 1987a, ‘Tests of Alternative Theories of Firm Growth’, Journal of Political Economy 85(4), 657–674.

    Article  Google Scholar 

  • EvansDavid S., 1987b, ‘The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries’, Journal of Industrial Economics XXXV(4), 567–581.

    Google Scholar 

  • FitzRoyFelix R. and KorneliusKraft, 1991, ‘Firm Size, Growth and Innovation: Some Evidence From West Germany’, in Zoltan J.Acs and David B.Audretsch (eds.), Innovation and Technological Change, An International Comparison, London: Harvestor Wheatsheaf, pp. 152–159.

    Google Scholar 

  • HallBronwyn H., 1987, ‘The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector’, Journal of Industrial Economics XXXV(4), 583–606.

    Google Scholar 

  • HymerStephen and PeterPashigian, 1962, ‘Firm Size and Rate of Growth’, Journal of Political Economy 70, 556–569.

    Article  Google Scholar 

  • KumarM. S., 1985, ‘Growth, Acquisition Activity and Firm Size: Evidence from the United Kingdom’, Journal of Industrial Economics XXXIII(3), 327–338.

    Google Scholar 

  • MansfieldEdwin, 1962, ‘Entry, Gibrat's Law, Innovation, and the Growth of Firms’, American Economic Review 52, 1023–1051.

    Google Scholar 

  • SchererF. M. and DavidRoss, 1990, Industrial Market Structure and Economic Performance, 3rd, Boston: Houghton Mifflin Company.

    Google Scholar 

  • SchmalenseeRichard, 1989, ‘Inter-Industry Studies of Structure and Performance’, in RichardSchmalensee and RobertWillig (eds.), Handbook of Industrial Organization, Vol. 2, Amsterdam: North-Holland.

    Google Scholar 

  • SimonHerbert, 1991, ‘Organizations and Markets’, Journal of Economic Perspectives 5(2), 25–44.

    Google Scholar 

  • SinghAjit and GeoffreyWhittington, 1975, ‘The Size and Growth of Firms’, Review of Economic Studies 42(1), 15–26.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Institute for Quantitative Economic Research, University of Hannover, Wunstorfer Strasse 14, D-3000, Hannover 91, Germany

    Joachim Wagner

Authors
  1. Joachim Wagner
    View author publications

    You can also search for this author in PubMed Google Scholar

Additional information

This paper is part of the research project ‘Production, Employment Growth, and Exports by Lower Saxonian Firms”. The computations based on the establishment level data from the official surveys of the manufacturing sector were made possible by a special arrangement between the Ministry of Economics, the Statistical Office, and the Labour Research Group at the Department of Economics, Hannover University. I am grateful to Uwe Rode for preparing the data base, to Wihelm Lorenz for writing a program that makes it possible to use these large data set on a PC, and to an unknown referee for helpful comments on an earlier version of this paper.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Wagner, J. Firm size, firm growth, and persistence of chance: Testing GIBRAT's law with establishment data from Lower Saxony, 1978–1989. Small Bus Econ 4, 125–131 (1992). https://doi.org/10.1007/BF00389853

Download citation

  • Accepted:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF00389853

Keywords

Search

Navigation