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The growth of business firms: Theoretical framework and empirical evidence

Pammolli, Fabio and Fu, Dongfeng and Buldyrev, Sergey V. and Riccaboni, Massimo and Matia, Kaushik and Yamasaki, Kazuko and Stanley, H. Eugene The growth of business firms: Theoretical framework and empirical evidence. Proceedings of the National Academy of Sciences, 102 (52). pp. 18801-18806. ISSN 1091-6490 (2005)

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We introduce a model of proportional growth to explain the distribution Pg(g) of business-firm growth rates. The model predicts that Pg(g) is exponential in the central part and depicts an asymptotic power-law behavior in the tails with an exponent ζ = 3. Because of data limitations, previous studies in this field have been focusing exclusively on the Laplace shape of the body of the distribution. In this article, we test the model at different levels of aggregation in the economy, from products to firms to countries, and we find that the predictions of the model agree with empirical growth distributions and size-variance relationships.

Item Type: Article
Identification Number: 10.1073/pnas.0509543102
Additional Information: Cover article
Uncontrolled Keywords: proportional growth; preferential attachment; Laplace distribution
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Q Science > QC Physics
Research Area: Economics and Institutional Change
Depositing User: Users 2 not found.
Date Deposited: 01 Jul 2011 09:32
Last Modified: 10 Oct 2013 08:38
URI: http://eprints.imtlucca.it/id/eprint/685

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