Skip to main content
SpringerLink
Log in

Theories of Firms' Growth and the Generation of Jobs

  • Published:
Review of Industrial Organization Aims and scope Submit manuscript

Abstract

This paper relates recent empiricalresearch on the growth of U.K. companies to the maineconomic theories of firms' growth and to empiricalresults for the U.S.A. Smaller and younger firms havebeen growing more quickly than larger and older firms, thus generating proportionately more new jobs. Theseresults do not support the various theories of staticand dynamic economies of scale. Serial correlation ofgrowth is very low, so success does not persist. Thesystematic tendency for small and younger firms togrow more quickly is the main reason why firm growthis not entirely stochastic.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Baily, M., E. Bartelsman, and J. Haltiwanger (1996) ‘Downsizing and Productivity Growth: Myth or Reality?’, in D. G. Mayes, ed., Sources of Productivity Growth. Cambridge: Cambridge University Press, Chapter 12.

    Google Scholar 

  • Baumol, W. J. (1959) Business Behavior, Value and Growth. New York: MacMillan.

    Google Scholar 

  • Berle, A. A., and G. C. Means (1932) The Modern Corporation and Private Property. New York: MacMillan.

    Google Scholar 

  • Boston Consulting Group (1972) Perspectives on Experience. Boston, MA: BCG.

    Google Scholar 

  • Caballero, R. J., and R. K. Lyons (1990) ‘Internal versus External Economies of Scale in European Industry’, European Economic Review, 34, 805–830.

    Google Scholar 

  • Casson, M. (1998) ‘Entrepreneurship and the Theory of the Firm’, in Z. J. Acs, B. Carlsson, and C. Karlsen, eds., Small Firms, Entrepreneurship and the Macroeconomy. Cambridge: Cambridge University Press.

    Google Scholar 

  • Chandler, A. D. (1990) Scale and Scope. Cambridge, MA: Belknap Press.

    Google Scholar 

  • Cyert, R. M., and J. G. March (1963) A Behavioral Theory of the Firm. Englewood Cliffs N. J.: Prentice Hall (1992) edition. Oxford: Blackwell.

    Google Scholar 

  • Dasgupta, P., and J. Stiglitz (1988), ‘Learning-by-Doing, Market Structure and Industrial and Trade Policies’, Oxford Economic Papers, 40, 246–268.

    Google Scholar 

  • Dunne, P., and A. Hughes (1994) ‘Age, Growth and Survival: UK Companies in the 1980s’, Journal of Industrial Economics, 42, 115–140.

    Google Scholar 

  • Evans, D. S. (1987a) ‘Tests of Alternative Theories of Firm Growth’, Journal of Political Economy, 95, 657–674.

    Google Scholar 

  • Evans, D. S. (1987b) ‘The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries’, Journal of Industrial Economics, 35, 567–581.

    Google Scholar 

  • Geroski, P. (1998) ‘An Applied Econometrician's View of Large Company Performance’, Review of Industrial Organization, 13, 271–293.

    Google Scholar 

  • Geroski, P. A., G. Urga, and C. F. Walters (1997) ‘Are Differences in Firm Size Transitory or Permanent?’, London Business School, mimeo.

  • Gibrat, R. (1931) Les Inégalités Economiques. Paris: Sirey.

    Google Scholar 

  • Grinyer, P. H., D. G. Mayes, and P. McKiernan (1988) Sharpbenders. Oxford: Blackwell.

    Google Scholar 

  • Hall, B. H. (1987) ‘The Relationship between Firm Size and Firm Growth in the US Manufacturing Sector’, Journal of Industrial Economics, 35, 583–606.

    Google Scholar 

  • Hart, P. E., and N. Oulton (1995) ‘Growth and Size of Firms’, National Institute of Economic and Social Research Discussion Paper No. 77.

  • Hart, P. E., and N. Oulton (1996a) ‘Growth and Size of Firms’, Economic Journal, 106, 1242–1252.

    Google Scholar 

  • Hart, P. E., and N. Oulton (1996b) ‘Job Creation and Variations in Corporate Growth’, National Institute of Economic and Social Research Discussion Paper No. 95.

  • Hart, P. E., and N. Oulton (1997) ‘Zipf and the Size Distribution of Firms’, Applied Economics Letters, 4, 205–206.

    Google Scholar 

  • Hart, P. E., and N. Oulton (1998a) ‘Job Creation and Destruction in the Corporate Sector: The Relative Importance of Births, Deaths and Survivors’, National Institute of Economic and Social Research Discussion Paper No. 134.

  • Hart, P. E., and N. Oulton (1998b) ‘Job Generation in the UK Corporate Sector, 1986–95’. National Institute of Economic and Social Research Discussion Paper No. 139.

  • Hart, P. E., and N. Oulton (1999) ‘Gibrat, Galton and Job Generation’, International Journal of the Economics of Business.

  • Hart, P. E., and S. J. Prais (1956) ‘The Analysis of Business Concentration: a Statistical Approach’, Journal of the Royal Statistical Society, A, 119, 150–190.

    Google Scholar 

  • Jovanovic, B. (1982) ‘Selection and the Evolution of Industry’, Econometrica, 50, 649–670.

    Google Scholar 

  • Lucas, R. E. (1978) ‘On the Size Distribution of Business Firms’, Bell Journal of Economics, 9, 508–523.

    Google Scholar 

  • Mansfield, E. (1962) ‘Entry, Gibrat's Law, Innovation and the Growth of Firms’, American Economic Review, 59, 1023–1051.

    Google Scholar 

  • Marris, R. (1964) The Economic Theory of “Managerial” Capitalism. London: MacMillan.

    Google Scholar 

  • Mueller, D. C. (1992) ‘The Corporation and the Economist’, International Journal of Industrial Organization, 10, 147–170.

    Google Scholar 

  • Nelson, R. R., and S. G. Winter (1982) An Evolutionary Theory of Economic Change. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Oulton, N. (1996a) ‘Increasing Returns and Externalities in UK Manufacturing: Myth or Reality?’, Journal of Industrial Economics, 44, 99–113.

    Google Scholar 

  • Oulton, N. (1996b) ‘Competition and the Dispersion of Labour Productivity amongst UK Companies’, National Institute of Economic and Social Research, Discussion Paper No. 103.

  • Oulton, N. (1998) ‘Competition and the Dispersion of Labour Productivity amongst UK Companies’, Oxford Economic Papers, 50, 23–38.

    Google Scholar 

  • Penrose, E. T. (1980) The Theory of the Growth of the Firm. Oxford: Blackwell.

    Google Scholar 

  • Prais, S. J. (1976) The Evolution of Giant Firms in Britain. Cambridge: Cambridge University Press.

    Google Scholar 

  • Richardson, G. B. (1964) ‘The Limits to a Firm's Rate of Growth’, Oxford Economic Papers, 16, 9–23.

    Google Scholar 

  • Robinson, E. A. G. (1934) ‘The Problem of Management and the Size of the Firm’, Economic Journal, 44, 242–257.

    Google Scholar 

  • Sargant, Florence, P. (1934) ‘The Problem of Management and the Size of Firm: A Reply’, Economic Journal, 44, 723–729.

    Google Scholar 

  • Scherer, F. M., and D. Ross (1990) Industrial Market Structure and Economic Performance, 3rd edn. Houghton Mifflin.

  • Simon, H. (1959) ‘Theories of Decision Making in Economics and Behavioral Science’, American Economic Review, 49, 253–283.

    Google Scholar 

  • Simon, H., and C. P. Bonini (1958) ‘The Size Distribution of Business Firms’, American Economic Review, 48, 607–617.

    Google Scholar 

  • Steindl, J. (1965) Random Processes and the Growth of Firms. London: Griffin.

    Google Scholar 

  • Sutton, J. (1997) ‘Gibrat's Legacy’, Journal of Economic Literature, 35, 40–59.

    Google Scholar 

  • Sylos Labini, P. (1969) Oligopoly and Technical Progress. Cambridge MA: Harvard University Press.

    Google Scholar 

  • Trau, F. (1996) ‘Why do Firms Grow?’, ESRC Centre for Business Research, University of Cambridge Working Paper No. 26.

  • Tuck, R. H. (1954) The Economic Theory of Rank. Oxford: Blackwell.

    Google Scholar 

  • Walshe, G. (1974) Recent Trends in Monopoly in Great Britain. Cambridge: Cambridge University Press.

    Google Scholar 

  • Williamson, O. E. (1964) The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm. Englewood Cliffs, N. J.: Prentice Hall.

    Google Scholar 

  • Williamson, O. E. (1967) ‘Hierarchical Control and Optimum Firm Size’, Journal of Political Economy, 75, 123–138.

    Google Scholar 

  • Williamson, O. E. (1970) Corporate Control and Business Behavior. Englewood Cliffs, N.J.: Prentice Hall.

    Google Scholar 

  • Wright, T. P. (1936) ‘Factors Affecting the Cost of Airplanes’, Journal of Aerospace Science, 3, 122–128.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Faculty of Letters & Social Sciences, Department of Economics, PO Box 218, Whiteknights, Reading, RG6 6AA, U.K.

    P. E. Hart

Authors
  1. P. E. Hart
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Hart, P.E. Theories of Firms' Growth and the Generation of Jobs. Review of Industrial Organization 17, 229–248 (2000). https://doi.org/10.1023/A:1007887626165

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1007887626165

Search

Navigation