Size and Growth of Mobile Phone Firms in Mainland China, Hong Kong, and Taiwan

Abstract

Focusing on mobile phone firms in Mainland China, Hong Kong, and Taiwan, this study examined whether firm size is independent of firm growth and, specifically, whether Gibrat’s law exists in the contemporary mobile phone industry. This study empirically analyzed whether the growth process of the mobile phone industry, which centers on innovation and high technology, is random or is related to the stationary time-series properties and size of the mobile phone firms. Thus, we used the novel, advanced panel Seemingly Unrelated Regressions Augmented Dickey-Fuller (SURADF) test proposed by Breuer, McNown, and Wallace (2001) to examine the time-series properties and stability of the total assets of 10 mobile phone firms in each quarter of 2004 to 2012. The 10 firms are manufacturers based in Mainland China, Hong Kong, and Taiwan that are primarily involved in producing mobile phones or mobile phone components. This study performed five conventional panel unit root tests, with the results all significantly supporting Gibrat’s law (Gibrat, 1931). In other words, the results of the general unit root tests showed that the growth of the 10 mobile phone firms was independent of firm size, indicating a random growth process. However, using the panel SURADF test, which considers the effect of cross-sectional influence among panel members and the effect of individual members in panel data, yielded significantly different test results. Specifically, one-third of the firms in Mainland China and Hong Kong and four-sevenths of those in Taiwan did not support Gibrat’s law. In addition, when the panel data set included firms from different countries, the effect of horizontal competition on the growth of the firms was more significant.