The Nature of Firm Growth

45 Pages Posted: 12 Dec 2017 Last revised: 24 May 2019

See all articles by Benjamin W. Pugsley

Benjamin W. Pugsley

University of Notre Dame - Department of Economics

Petr Sedlacek

University of Oxford

Vincent Sterk

University College London

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2019

Abstract

About half of all startups fail within five years, and those that survive grow at vastly different speeds. Using Census microdata, we estimate that most of these differences are determined by ex-ante heterogeneity rather than persistent ex-post shocks. Embedding such heterogeneity in a firm dynamics model shows that the presence of ex-ante heterogeneity (i) is a key determinant of the firm size distribution and firm dynamics, (ii) can strongly affect the macroeconomic effects of firm-level frictions, and (iii) plays an important role in the recently documented decline in business dynamism and the apparent disappearance of high-growth startups (“gazelles”).

Keywords: Firm Dynamics; Startups; Entrepreneurship; Macroeconomics; Administrative Data

JEL Classification: D22; E23; E24

Suggested Citation

Pugsley, Benjamin W. and Sedlacek, Petr and Sterk, Vincent, The Nature of Firm Growth (May 20, 2019). Available at SSRN: https://ssrn.com/abstract=3086640 or http://dx.doi.org/10.2139/ssrn.3086640

Benjamin W. Pugsley

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Petr Sedlacek

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Vincent Sterk (Contact Author)

University College London ( email )

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