Influence of Firm Size, Age and Usage of IT on the Growth of Firms: Some Evidence from Hong Kong' s Service Sector

Abstract

The study uses a sample of FIRB sector firms in Hong Kong to examine some aspects of firm dynamics and characteristics. The most important finding from the model is that usage of information technology (IT) is one of the key factors that explain the variation of growth of modern firms. It also finds that firm size is an important determinant of firm growth: the smaller the firm size, the greater the firm growth. Gilbrat's Law therefore fails, and this finding is consistent with pioneering works of Evans (1987) and Hall (1987). Indicating a close relationship between the usage of IT and the increasing trend of knowledge-based employees in firms, it is also found that skilled employees exert a relatively positive influence on the growth of firm. This finding may be indicative of the situation where new working practices such as team working is practiced, where group space is important rather than permanent territorial offices, where groups of skilled professionals can work together with relatively efficient space usage. Results, however, confirm that location of the firm does not play an important role for the growth.