Gibrat's Law and Market Selection in the Radio, TV Telecommunications Equipment Industry.

摘要

According to Gibrat’s Law of Proportionate Effect, the growth rate of a given firm is independentudof its size at the beginning of the period examined. In contrast to the previous literature on theudsubject, this paper seeks to test the Law by taking account of both the entry process and the role ofudsurvival/failure in reshaping a given population of firms over time. It does so by focusing on theudentire population of firms (including newborn ones) in the Italian Radio, TV &udTelecommunications equipment industry and tracking them over seven years. Consistently with theudprevious literature, it finds that - in general - Gibrat’s Law is to be rejected, since smaller firms tendudto grow faster than their larger counterparts. However, the paper’s main finding is that this rejectionudof Gibrat’s Law may be due to market dynamics and selection. In other words, it is due to the entryudprocess and the presence of transient smaller firms. Indeed, whilst it is found that Gibrat’s Law hasudto be rejected over a seven-year period during which both incumbent and newborn firms areudconsidered, for both sub-populations of surviving firms a convergence towards Gibrat-like behaviorudover time can be detected. Thus, market selection “cleans” the original population of firms and theudresulting industrial “core” (mature, larger, well-established and most efficient firms) does not seemudto depart from a Gibrat-like pattern of growth.