The Relationship between Firm Growth, Size, and Age : Estimates for 100 Manufacturing Industries

Examines the impact of firm growth, firm size, and firm age on firm dynamics in the manufacturing industry. The data analyzed are from the Small Business Data Base (SBDB) constructed by the Office of Advocacy of the U.S. Small Business Administration and consist of 105,186 firms in 100 manufacturing industries operating between 1976 and 1980. Firm dynamics are viewed in terms of firm growth, firm dissolution, and variability of firm growth. Several key findings are presented. The first is that firm age is an important determinant of firm dynamics. As firms age, there is a decrease in the probability of firm failure, firm growth, and the variability of firm growth. This finding is consistent with Jovanic's learning model. Another result of this study is the determination that firm growth decreases at a diminishing rate with firm size. This finding leads to the conclusion that Gibrat's Law fails for smaller firms. Before the findings of this study may be accepted, more refined datasets must be used to replicate the results. (SRD)