Abstract
The current study investigated the relationship between firm size and growth rates of the U.S. domestic and international restaurant firms. Specifically, we test Gibrat’s Law which suggests that the size of a firm and its growth rate are independent. We found that the U.S. restaurant firms have a negative relationship between firm size and growth rates, suggesting a rejection of Gibrat’s Law. More specifically small and medium scaled firms exhibit a positive size-growth rate relationship while larger firms show a negative relationship between size and growth rate. However, this study found that Gibrat’s Law does hold only for the small scaled international restaurant firms, corroborating that firm growth rate might be a ‘random walk’ and independent of firm size for this segment. The results suggest that small restaurant firms pursuing international growth strategies should carefully consider the robustness of this strategy.
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