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Firms as bundles of discrete resources – towards an explanation of the exponential distribution of firm growth rates
journal contribution
posted on 2023-06-08, 11:56 authored by Alex Coad, Max PlanckA robust feature of the corporate growth process is the Laplace, or symmetric exponential, distribution of firm growth rates. In this paper, we sketch out a class of simple theoretical models capable of explaining this empirical regularity. We do not attempt to generalize on where growth opportunities come from, but rather we focus on how firms build upon growth opportunities. We base ourselves on Penrose's (1959) description of firm growth to explain how the interdependent nature of discrete resources may lead to the triggering off of a series of additions to a firm's resources. In a first formal model, we consider the case of employment growth in a hierarchy, and observe that growth rates follow an exponential distribution. In a second model, we include plant and capital as resources and we are able to reproduce a number of stylized facts about firm growth.
History
Publication status
- Published
Journal
Eastern Economic JournalISSN
0094-5056Publisher
Palgrave MacmillanExternal DOI
Issue
2Volume
38Page range
189-209Department affiliated with
- SPRU - Science Policy Research Unit Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-07-03Usage metrics
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