Inside the virtuous circle between productivity, profitability, investment and corporate growth: An anatomy of Chinese industrialization

Marco Grazzi, Xiaodan Yu, Giovanni Dosi, Jiasu Lei

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

This work explores the dynamics of the "virtuous circle" driving the impressive Chinese catching-up and growth by investigating the micro relationships linking productivity, profitability, investment and growth, based on China's manufacturing firm-level dataset over the period 1998-2007. Interestingly and somewhat puzzlingly, we find that productivity variations, rather than relative levels, are the prevalent productivity-related determinant of firm growth. Moreover, the direct relation between profitability and firm growth is much weaker and its contribution to the explanation of the different rates of firm growth is almost negligible. The only visible profitability-growth relationship is mediated via investment. Firm's contemporaneous and lagged profitabilities display positive and significant effect on the probability to report an investment spike, and, in turn, investment activities are related to higher firm growth.
Original languageEnglish
Pages (from-to)1020-1038
Number of pages19
JournalResearch Policy
Volume46
DOIs
Publication statusPublished - 2017

Keywords

  • Catching-up
  • Chinese industry
  • Engineering (all)
  • Learning
  • Leisure and Hospitality Management
  • Management Science and Operations Research
  • Management of Technology and Innovation
  • Productivity
  • Profitability
  • Strategy and Management1409 Tourism
  • Virtuous circle

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