TY - UNPB
T1 - Waiting for Godot: the failure of SMEs in the Italian Manufacturing Industry to grow
AU - Bagnato, Luca
AU - Baussola, Maurizio Luigi
AU - Bartoloni, Eleonora
PY - 2018
Y1 - 2018
N2 - We use a panel of Italian manufacturing firms for the period
2001-2014 to analyse the distribution of firm size, and then test
for the validity of Gibrat’s law using unit root tests. Although
Gibrat’s Law is rejected and the estimates suggest that small
firms grow faster than larger ones, we do not observe a significant
change in the average size of companies at the end of the
period under investigation. Also, by using a long-run Transition
Probability Matrix, we verify that the steady-state distribution
of firm size remains stable. The higher propensity to grow shown
by smaller firms is confined to the size class in which the firm
is established. We further investigate the relationship between
the rate of growth in a firm’s size conditional on specific firm
and industry characteristics. Export intensity plays a significant
role in affecting the size growth rate together with industry
characteristics related to technological levels. Finally, we estimate
the probability that a firm increases in size relative to the
mean size prevailing in its own size class over a 14-year interval.
This approach enables us to highlight those factors that affect
this probability, thereby enabling us to underline how Gibrat’s
Law tests, although important, require complementary analysis
to ascertain whether a firm’s propensity to increase in size is a
long run effect and thus a significant modification of the distribution
of company size or only implies a marginal increase in
size within a reference size class.
AB - We use a panel of Italian manufacturing firms for the period
2001-2014 to analyse the distribution of firm size, and then test
for the validity of Gibrat’s law using unit root tests. Although
Gibrat’s Law is rejected and the estimates suggest that small
firms grow faster than larger ones, we do not observe a significant
change in the average size of companies at the end of the
period under investigation. Also, by using a long-run Transition
Probability Matrix, we verify that the steady-state distribution
of firm size remains stable. The higher propensity to grow shown
by smaller firms is confined to the size class in which the firm
is established. We further investigate the relationship between
the rate of growth in a firm’s size conditional on specific firm
and industry characteristics. Export intensity plays a significant
role in affecting the size growth rate together with industry
characteristics related to technological levels. Finally, we estimate
the probability that a firm increases in size relative to the
mean size prevailing in its own size class over a 14-year interval.
This approach enables us to highlight those factors that affect
this probability, thereby enabling us to underline how Gibrat’s
Law tests, although important, require complementary analysis
to ascertain whether a firm’s propensity to increase in size is a
long run effect and thus a significant modification of the distribution
of company size or only implies a marginal increase in
size within a reference size class.
KW - Gibrat's law
KW - firm size distribution
KW - Gibrat's law
KW - firm size distribution
UR - http://hdl.handle.net/10807/118969
M3 - Working paper
SN - 9788834335895
BT - Waiting for Godot: the failure of SMEs in the Italian Manufacturing Industry to grow
PB - Vita e Pensiero
ER -