Firm Size and Growth Rate Variance: The Effects of Data Truncation(Article)(Open Access)
- aSchool of Business and Economics and UNU-MERIT, Maastricht University, P.O. Box 616, 6200 MD Maastricht, Netherlands
- bDepartment of Economics, University of Bergamo, Via dei Caniana 2, 24127 Bergamo, Italy
- cUrban and Regional Research Centre Utrecht (URU), Utrecht University, P.O. Box 80.115, 3508 TC Utrecht, Netherlands
Abstract
This paper discusses the effects of the existence of natural and/or exogenously imposed thresholds in firm size distributions on estimations of the relation between firm size and the variance in firm growth rates. We argue that these estimations are upwardly biased whenever the threshold operates on the same proxy that is used to calculate the growth rates. We show the potential impact of the bias on simulated data, suggest a methodology to improve these estimations, and present an empirical analysis on Dutch firms. The only stable relation that emerges is the negative relationship between firm size and growth rate variance. © 2012 The Author(s).
Indexed keywords
| GEOBASE Subject Index: | economic analysisempirical analysisestimation methodfirm sizegrowth rateindustrial developmentindustrial performancesampling bias |
|---|---|
| Regional Index: | Netherlands |
Funding details
| Funding sponsor | Funding number | Acronym |
|---|---|---|
| 60CEFI11 | ||
| Universiteit Utrecht | UU |
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1
Acknowledgments The authors thank Lawrence J. White (general editor), two anonymous referees, Andrew Bernard, Koen Frenken, and the participants at the DIME Workshop on “The dynamics of firm evolution: productivity, profitability and growth”, Pisa, 3–4 October 2008. The empirical work was carried out at the Centre for Research of Economic Microdata at Statistics Netherlands (CBS). The views expressed in this paper are those of the authors and do not necessarily reflect the policies of Statistics Netherlands. The authors thank Gerhard Meinen and on-site staff of CBS for their collaboration. This work was supported by Utrecht University [High Potential Grant (HIPO) to E. Cefis and K. Frenken]; and the University of Bergamo [grant ex 60 %, n. 60CEFI11, Department of Economics, to E. Cefis].
- ISSN: 0889938X
- Source Type: Journal
- Original language: English
- DOI: 10.1007/s11151-012-9350-z
- Document Type: Article
Cefis, E.; Department of Economics, University of Bergamo, Via dei Caniana 2, Italy;
© Copyright 2012 Elsevier B.V., All rights reserved.
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