Size, Age and Activity Sector on the Growth of the Small and Medium Firm Size

Abstract

The purpose of this study is to provide a greater understanding of the factors contributing to the growth dynamics of small and medium-sized firms. Empirical evidence, particularly in relation to the influence of firm size, age, and activity sector, is offered. The validity of Gibrat's approach and the Learning theory are contrasted. Data on 1,092 non-financial firms in the Spanish Canary Islands were gathered from the Commercial Performance Information Bureau of the University of La Laguna during the years 1990-1996. During this six-year period, the Canary Islands' small firms expanded at a more rapid rate than firms in other parts of Spain. These high growth rates decreased as firms increased in size. In addition, during the first five years after the firms were established, the smaller firms grew and changed at a more rapid rate than the established firms. The activity sector had no effect on corporate growth rates. (SFL)