This paper reports on one of the first empirical attempts to investigate smalludfirm growth and survival, and their determinants, in the Peoples’ Republic of China.udThe work is based on field work evidence gathered from a sample of 83 Chineseudprivate firms (mainly SMEs) collected initially by face-to-face interviews, andudsubsequently by follow-up telephone interviews a year later. We extend the modelsudof Gibrat (1931) and Jovanovic (1982), which traditionally focus on size and ageudalone (e.g. Brock and Evans, 1986), to a ‘comprehensive’ growth model with twoudtypes of additional explanatory variables: firm-specific (e.g. business planning); and environmental (e.g. choice of location). We estimate two econometric models: a ‘basic’ age-size-growth model; and a ‘comprehensive’ growth model, using Heckman’s two-step regression procedure. Estimation is by log-linear regression on cross-section data, with corrections for sample selection bias and heteroskedasticity. Our results refute a pure Gibrat model (but support a more general variant) and support the learning model, as regards the consequences of size and age for growth; and our extension to a comprehensive model highlights the importance of location choice and customer orientation for the growth of Chinese private firms. In the latterudmodel, growth is explained by variables like planning, R&D orientation, marketudcompetition, elasticity of demand etc. as well as by control variables. Our work on small firm growth achieves two things. First, it upholds the validity of ‘basic’ size-age-growth models, and successfully applies them to the Chinese economy. Second, it extends the compass of such models to a ‘comprehensive’ growth model incorporating firm-specific and environmental variables.
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