Firm Growth Rates Research Articles

Does young firm growth persist? The role of firm age

ABSTRACT This study investigates serial correlation in growth rates of young firms. Specifically, we examine how past growth affects current growth and how this relationship is moderated by firm age. We use data from four cohorts of Spanish firms tracked over their first 10 years of operation. Results from regression analyses show a positive autocorrelation of growth rates. However, we also find that they become erratic with age. The study contributes to the literature by providing a nuanced view of growth autocorrelation in the case of young firms.

Technological Advancement and Its Impact on International Trade Dynamics: A Comprehensive Study of Bangladesh

This research delves into the intricate relationship between technological advancement and international trade dynamics in Bangladesh, a nation experiencing a burgeoning number of internet users and technological immersion. Analyzing data from a sample of 25 firms across diverse sectors, the study unveiled a potent correlation between technological adoption and firm growth. Notably, large firms in the Ready-Made Garments (RMG) and IT sectors demonstrated pronounced technological integration, positively influencing their trade growth. In contrast, the agriculture (AGRI) sector presented unique challenges, with medium and small enterprises perceiving technological assimilation as a significant barrier. Regression analyses reinforced technological adoption as a paramount determinant of growth, elucidating approximately 91.2% of the variance in firm growth rates. Despite the overarching positive trajectory, the research underscores variances in technological impact across sectors and firm sizes. Conclusively, while technology emerges as a catalyst for growth in Bangladesh's international trade, its uniform adoption and consequent benefits necessitate tailored strategies and infrastructural enhancements.

Does firm size improve firm growth? Empirical evidence from an emerging economy

This study aims to examine the relationship between firm size and firm growth in Vietnam. The literature does not in general give support to Gibrat’s Law stating that the expected increase in firm size is proportionate to its initial size, or that firm growth rates are independent of firm size. The present study relies on a sample of 578 listed Vietnamese companies representing eight different industries and covering the period 2010 to 2020. The analysis reveals that growth in firm revenues does not give support to a hypothesis of independence of initial firm sizes. When the firm size is measured by total assets the opposite result appears, i.e. the Gibrat’s Law is not rejected. When including also the age of the firms in the test methodology the conclusion will be that firm growth – measured by revenue or assets – in all cases will decrease with firm size.

Uncertainty and Immigrant Entrepreneurship: Evidence from Brexit

Immigrant entrepreneurs are a major driver of economic growth, and their decisions about where to locate can greatly affect the entrepreneurial ecosystem of a country. Meanwhile, increasingly uncertain immigration environments might discourage immigrants from establishing new ventures in host countries. This paper exploits the unexpected result of the Brexit referendum to investigate the relationship between immigration uncertainty and the entry of immigrant-founded ventures of different quality. We propose a model of immigrant entrepreneurial entry and introduce a new measure of venture quality at founding. We find that a surge in uncertainty decreases the growth rate of new immigrant-founded firms by 3.2%. The reliance on other immigrant actors exacerbates the negative effect that uncertainty has on entry. Moreover, low- and high-quality firms are the most affected, while the effect for medium-quality firms is negligible. Back-of-the-envelope calculations suggest that Brexit discouraged the entry of around 620 low-quality and 250 high-quality firms. Our model suggests that whereas founders of low-quality ventures might decide to take up employment, founders of high-quality ventures might be better off establishing their companies in another country. History: This paper has been accepted for the Organization Science Special Issue on Migration and Organizations. Funding: C. Acosta thanks EAFIT’s internal funding for research projects. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.16011 .

TRACKS AND TRAILS OF ED-TECH FIRMS IN INDIA

The Indian educational technology (Edtech) industry has been experiencing remarkable growth in recent years, driven by a range of factors, including increased demand, investor interest, and mergers and acquisitions. The COVID-19 pandemic has also played a significant role in accelerating the growth of the industry. With the closure of schools and universities during lockdowns, there was a surge in demand for online education solutions. In India, the growth rate of edtech firms decreased during the year 2022. An analysis of customer reviews from 2020 to 2022 are used in this article to determine why edtech firms succeed and fail.

Drivers of SME Growth: Quantile Regression Evidence From Developing Countries

This study explores the determinants of firm growth rate for small and medium-sized enterprises (SMEs) in different quantiles of the conditional growth rate distribution using data from World Bank Enterprise Surveys (WBES) covering 80 developing and emerging markets. It contributes to the literature by providing evidence of the effects of insufficiently investigated factors on firm growth. It also examines the impacts on firm growth of certain factors for which there is conflicting empirical evidence. Our quantile regression results show that firm age is negatively associated with firm growth rate throughout the entire distribution, except the lower tail. Firm size has a negative effect on growth rate in the upper tail of the distribution. We also find that the industry experience of the top manager positively impacts the growth rate only in the upper-middle range of the distribution. Product innovation positively affects firm growth rate from the lower-middle range to the highest quantile of the growth distribution. Additionally, we provide evidence that process innovation has a positive relationship with growth in the middle quantiles. SMEs that see access to financing as a more severe obstacle to their operations have lower growth rates throughout almost the entire growth distribution.

Covid-19 and Firms’ Stock Price Growth: The Role of Market Capitalization

ABSTRACT This paper studies the role of capitalization on firms’ stock price growth in response to new cases of Covid-19 infections in the United States. Controlling for firm and time fixed effects, our panel model estimates show that the effect of new cases of Covid-19 infections on firms’ stock price growth is significantly increasing in capitalization: For each one standard deviation increase in capitalization, a one standard deviation increase in new cases of Covid-19 infections increases the weekly growth rate of firms’ stock prices by about 0.7% points. Effects of capitalization on the impact that Covid-19 infections have on firms’ stock price growth are largest in the travel, tourism, and hospitality sector. Smaller but still positive effects of capitalization are present in the pharmaceutical products, high-tech, and banking and finance sectors. The results are robust to controlling firms’ elasticity of demand, productivity, financial constraints, managerial compensations, and aggregate money growth and economic activity.

Propagation of Shocks in Individual Firms Through Supplier-Customer Relationships.

We quantify the magnitude of shock that propagates individual firms through direct supplier–customer relationships. First, we construct machine learning models that predict a firm’s sales growth rate based on corporate attributes and sales information of the firm and its suppliers/customers. The prediction models indicate that not only macroeconomic factors, such as the year and country, but also sales fluctuation of suppliers/customers are important predictors of the firm’s sales growth rate. Second, we plot the change in the predicted sales growth rates in accordance with those of suppliers/customers using a partial dependence plot. Thus, we quantify how much a firm’s sales growth rate changes in accordance with the changes of its suppliers/customers, namely, the magnitude of shock propagation. Finally, we verify the magnitude of shock propagation by comparing it with the sales growth rate of firms that have suppliers/customers negatively impacted by Hurricane Sandy in the U.S. in 2012. The comparison indicates that there is no significant difference between them and further demonstrates that we can simulate how much the shock that occurred in the disaster-affected firms propagates to their transaction firms.

The Effects of Credit Supply Shocks on Malaysia's Economy

This study has examined the impacts of credit supply shocks and other common economic shocks (aggregate demand & supply and monetary shocks) on Malaysia's macroeconomic variables, using the Bayesian structural vector autoregressive (SVAR) model and employing sign restrictions. The results showed that an expansionary credit supply shock positively affected the Malaysian economy, consistent with the existing literature. Based on the variance decomposition finding, credit supply shocks explained a significant portion of the anticipated variation in the GDP growth, inflation, and, most importantly, credit growth in Malaysia. This study further decomposed total private non-financial corporate loans into two components: households and non-financial firms. Unlike other economies that have extensively researched this subject matter (US, UK, Euro Area), the growth rate of households and non-financial firms differed greatly in Malaysia. The empirical findings revealed considerable distinctions between these two components, indicating that different treatments or policy formulations are required rather than employing the same policy to boost or govern Malaysia's credit market.

Local financial development and the growth of small firms in Vietnam

This paper examines whether heterogeneities in financial development among Vietnamese provinces matter for firm growth in Vietnam. Using a nationally representative firm survey that covers more than 41,000 firms for the period 2009 − 2013, we estimate the impact of provincial financial development on the growth rates of firms by accounting for sectoral differences in growth opportunities. We find that province-level financial development promotes the growth rates of sales, investment and sales per worker of small firms, and reduces the growth rate of the wage-to-sales ratio. Our results imply that firms grow faster in provinces with a higher level of financial development. Moreover, the effect of financial development on growth rates is larger when firms operate in sectors with better growth opportunities.

Enlightening the influence of family TMT involvement on firm growth and degrowth rates

Enlightening the influence of family TMT involvement on firm growth and degrowth rates

The effect of geographic scope on growth and growth variability of SMEs

The impact of international expansion on the success of small and medium enterprises (SME) has been extensively studied, particularly with respect to the performance implications of expansion into foreign markets. Yet, the literature is still unclear on the consequences of the SME's geographic scope (i.e., the number of countries a firm operates in). Drawing on the contemporary internalization theory, we build a theoretical framework suggesting that SMEs’ geographic scope positively impacts firm growth rate, yet makes it less reliable, i.e., a positive effect on both the mean and the variability of growth. We also suggest that this relationship is highly context-dependent. The positive benefits of the increasing scope materialize only when the firms can manage the rising complexity of operational governance through leveraging the managerial international competencies (obtained, e.g., through international education and international experience) and constraining the geographic expansion to their home region. The framework is empirically tested on data from Swiss SMEs engaged in international operations, employing the multiplicative heteroscedasticity regression model specification with endogenously modeled scope.

Assessing the impact of criminal prosecution of entrepreneurs on small and medium-sized enterprises in Russia

A significant proportion of entrepreneurs as well as Russian population in general consider the possibility of criminal prosecution to be one of the main problems that hinders business development in Russia. However, only a small proportion of entrepreneurs are subjected to this type of prosecution. The current study attempts to empirically test the hypothesis about the negative impact of unjustified criminal prosecution on entrepreneurial activity. First, we examine the mechanism of unjustified criminal prosecution of entrepreneurs and then using mixed effects regression modelling on panel data for 2017—2021 assess its impact on the growth rate of the number of small and medium-sized enterprises (SMEs). The number of appeals reviewed by the Center for Public Procedures “Business against corruption” (CPP “BAC”) is used as an indicator of unjustified criminal prosecution. The results show that each additionally handled appeal reduces the rate of growth in the number of SMEs in the medium term. This relationship is explained via the theory of signals: appeals to the CPP “BAC” serve as indicators of unjustified prosecution problem for entrepreneurs. If this problem persists, a decrease in the growth rates of firms, and an increase in their number in the shadow economy can also be expected.

RELATIONSHIP BETWEEN FIRM SIZE AND FIRM GROWTH: EVIDENCE FROM KOREAN MANUFACTURING FIRMS

This study uses a representative sample of Korean manufacturing firms for the period 2010–2018 to examine the relationship between firm size and growth in various aspects. The main findings are as follows. First, smaller firms have a higher average growth rate and wider growth dispersion (growth variance) across the firms. Second, the growth rates of micro and small firms show negative growth persistence resulting in a volatile growth pattern. In contrast, medium and large firms have a high probability that the growth rates persist over time, indicating a stable growth pattern. Third, the first and second findings are robustly observed regardless of the disaggregated sectors in the manufacturing industry, which are divided based on their technological-intensity levels. The findings imply that (a) it is necessary to analyze and understand differences in growth patterns by firm size and (b) firm growth requires policies tailored to the size of firms.

DETERMINANTS OF FIRM’S PROFITABILITY: IN THE CASE OF SELECTED ETHIOPIAN TANNERY COMPANIES

Purpose: The general objective of this study is to investigate the determinants of profitability in the case of selected Ethiopian Tannery Companies. 
 Methodology: The study employed an explanatory research design with a quantitative approach to assess the relationship between profitability and its determinant factors. The study had a population size of 29 Tannery Companies in Ethiopia. To undertake this research paper, the researcher used non-probabilistic sampling specifically the judgmental sampling method was used to select eight (8) sample Tannery Companies. Balanced panel data were analyzed by using descriptive statistics, correlation, and Multiple Linear regression analysis. Ordinary Least square model in the form of multiple regression analysis was applied to analyze the annual data generated from the financial statements of the selected Tannery Companies covering a period from 2008 - 2017 G.C. In this study, ROA was used as the measure of profitability. 
 Findings: The paper includes tangibility, firm size, liquidity, leverage, growth rate, and inventory turnover as independent factors that determine the profitability of Tannery Companies in Ethiopia. The result from the empirical examination found that only Tangibility, Inventory Turnover, and Firm growth rate have a statistically significant effect on the companies (ROA), whereas Liquidity, Leverage, and Firms size have a statistically insignificant effect on the profitability of Ethiopian Tannery Companies.
 Conclusion: Besides, the study suggested that companies that give more attention to the statistically significant variables of the sectors such as firm growth rate, inventory turnover, and tangibility. While the results may not be generalizable to all Ethiopian Tannery Companies found in the country, the findings should provide valuable information to managers for developing their strategies with regard to firm-specific determinants.

Risk Culture and Strategic Planning Roles on Enterprise Risk Management and Firm Performance in Selected African Countries

Enterprise risk management (ERM) research has mostly been limited to factors determining its implementation and its effects on firm performance. Despite a clear need for its establishment in sound risk culture and its integration with strategic planning, organisational leaders continue to implement these management concepts in isolation. Academic research into these conjoint relationships has also received less attention in the literature. This study investigates whether ERM's effect on firm financial performance, measured by return on assets, is mediated by risk culture and strategic planning. The study provides empirical evidence that adopting ERM solely does not enhance a firm's financial performance. The ERM, risk culture, and strategic planning constructs are empirically determined to be correlated. Strategic planning has a direct and positive relationship with firm performance. The study further provides empirical evidence that the positive effects of ERM implementation on firm financial performance are mediated by risk culture and strategic planning. The size of a firm and its financial leverage are remarkable determinants of firm performance, while firm age and growth rate are not. The pieces of evidence have been presented from an under-investigated context in Africa with other contributions to the literature, such as, providing comprehensive measures of ERM and risk culture and responding to calls to synthesise risk and strategic management. This study also advances multiple mediation analysis and the use of PLS-SEM in the ERM literature.

Intellectual Capital Efficiency and Its Impact on Sustainable Development of Agri-Business Sector in India

Recognizing the importance of IC components, businesses must devise strategies for investing in various IC components while judiciously spending their limited knowledge-based resources. There is a growing demand for research on the link between sustainable development and organization’s intellectual capital. The current research explores the intellectual capital efficiency’s effect on the sustainable growth rate of Indian agri-business firms through modified value-added intellectual capital model. The study adopts a fixed effect regression model to analyze the repercussion of ICE on SGR. The findings of the study reveal that capital employed efficiency exhibits a noteworthy negative impact on sustainable growth of companies, while relational capital efficiency has a noteworthy influence. Human capital efficiency, structural capital efficiency, and innovation capital efficiency do not have significant impact on companies’ sustainable growth rate.

Reclamation of a resource extraction site: A differential game approach

AbstractWe study an extraction site reclamation problem in a two‐player differential game setting over a finite time horizon. Environmental regulation requires each firm to engage in reclamation efforts during the entire lifespan of the extraction site and to pay an abandonment reclamation fee at the end of its lease term for the unclaimed pollution caused by firms’ activities. Firms determine their reclamation efforts in order to minimize their reclamation cost. We analyze and compare individual firms’ choices and the pollution stock in the noncooperative and the cooperative cases by distinguishing between situations in which firms are homogeneous and heterogeneous. We study the case in which firms have different lease durations and different degrees of environmental liability. We show that the dynamics of the reclamation efforts may be substantially different under noncooperation and cooperation, and in both cases, it is mainly determined by how the rate of time preference and the growth rate of firms’ liabilities compare. Moreover, in all scenarios, the reclamation efforts generally rise with the degree of liability and fall with the lease duration, suggesting that in order to promote better environmental outcomes, the regulators should carefully determine the lease conditions by introducing intra‐term reclamation fees along with stringent environmental accountability.

The impact of internal financial determinants on the financial performance of listed mineral firms on the Vietnam Stock Exchange

This study aims to investigate the impact of internal financial factors on the financial performance of mineral firms listed on the Vietnam Stock Exchange. The research uses quantitative and qualitative methods to process the data collected. The results reveal that determinants of internal financial factors, including solvency, have a negative correlation with return on sales (ROS); firm growth rate (RG) has a positive correlation with ROS; capital structure influences the return on equity (ROE) positively, and capital structure negatively affects ROE; capital structure and DR have a negative impact on return on assets (ROA); current assets structure have a positive correlation with the ROA; CR has a negative impact on ROA; while firm RG and age have a positive correlation with ROA; the remaining determinants do not influence financial performance. Nhung, Daphné, and Huyen (2021) concluded that two variables consisting of total assets turnover ratio (ATR) and growth in sales significantly influence financial performance (FP) when it is measured by return on equity (ROE) or return on sales (ROS). However, this impact level of internal financial determinants is different. Finally, some suggestions are shown to enhance the financial performance of listed mineral firms in Vietnam

Corporate Debt Mix and Long-term Firm Growth in Japan

ABSTRACT This paper examines how firms change debt financing channels in line with the development of financial markets. In this aim, a data set of Japanese listed firms from 1965 (with more than 10% of annual GDP growth) to 2015 (almost 0% GDP growth) is used. We find a long-term change in the debt mix from internal debt financing (e.g., trade credits) to external debt financing (e.g., public bonds). Furthermore, we document that the firm growth rate is positively related to bond financing and negatively associated with trade credits. These associations are not conditional on interlocking business relationships with Keiretsu. The findings imply that the role of established firms’ internal financing channels diminishes as financial markets develop along with economic growth.