Recent evidence suggests that a power-law relationship exists between a firm's size and the variance of its growth rate. The flatness of the relation is regarded as puzzling, in that it suggests that large firms are not much more stable than small firms. It has been suggested that the power-law...

A model is proposed which offers a candidate explanation for the power-law relation between firm size and the variance of growth rates reported by Stanley et al. in 1996. (A full version of this paper appears in vol. 312 (2002), pp. 577–590 of this journal).