Sources of Firm Life-Cycle Dynamics: Size vs. Age Effects
39 Pages Posted: 18 Oct 2014 Last revised: 20 Aug 2020
Date Written: January 5, 2017
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
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