Sources of Firm Life-Cycle Dynamics: Size vs. Age Effects

39 Pages Posted: 18 Oct 2014 Last revised: 20 Aug 2020

See all articles by Lorenz Kueng

Lorenz Kueng

University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management

Mu-Jeung Yang

University of Washington - Department of Economics

Bryan Hong

Henry W. Bloch School of Management, University of Missouri-Kansas City

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Date Written: January 5, 2017

Abstract

What determines the life-cycle of businesses? Exploiting unique firm-level panel data on internal organization and innovation we establish three key sets of stylized facts to inform recent theories of firm life-cycles. First, life-cycle effects are driven by startups, not by new establishments of existing firms. Second, organizational restructuring and innovation are both strongly correlated with firm growth but not with firm age, in contrast to passive learning theories of firm dynamics. Third, there are important sectoral differences in innovation activities which are monotonically increasing in firm size for manufacturing firms but hump-shaped for firms in service industries.

Keywords: firm life-cycle, organizational capital, innovation

Suggested Citation

Kueng, Lorenz and Yang, Mu-Jeung and Hong, Bryan, Sources of Firm Life-Cycle Dynamics: Size vs. Age Effects (January 5, 2017). Swiss Finance Institute Research Paper No. 20-34, Available at SSRN: https://ssrn.com/abstract=2511069 or http://dx.doi.org/10.2139/ssrn.2511069

Lorenz Kueng (Contact Author)

University of Lugano - Faculty of Economics

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Mu-Jeung Yang

University of Washington - Department of Economics ( email )

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Bryan Hong

Henry W. Bloch School of Management, University of Missouri-Kansas City ( email )

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