The Nature of Firm Growth
45 Pages Posted: 12 Dec 2017 Last revised: 24 May 2019
There are 2 versions of this paper
The Nature of Firm Growth
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: Suggested Citation