Abstract
Using an augmented version of Gibrat's law, we theorized and examined the persistence of firm growth when firms increase their research and development (R&D) investment. Using 17 years of data from 1361 firms (616 small and medium-sized enterprises [SMEs] and 745 large firms), this study analyzed the effect of the dynamic interaction between past growth rate and R&D investment on the current growth rate of firms. Based on a quantile regression analysis, study findings suggested that SMEs showed declining growth after high growth. However, we also found that high-growth SMEs that increased their R&D investment could achieve persistence of growth in the following year. Implications are discussed for research, practice, and policy.
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