No. 394 - Firm Size Distribution and Growth

Temi di discussione (Working papers)
by Patrizio Pagano and Fabiano Schivardi
February 2001
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We empirically characterize the sectoral distribution of firm size for a set of European countries, finding substantial differences. We then study the relationship between productivity growth at the sectoral level and size structure. We find a positive and robust association between average firm size and growth. Asking why size should matter for growth, we consider the role of innovative activity, to construct a test based on the differential effect of size on growth according to various indicators of R&D intensity at the sectoral level. Our results indicate that larger size fosters productivity growth because it allows firms to take advantage of all the increasing returns associated with R&D. We finally argue that our test can be interpreted as a test of reverse causality, which lends support to the view of firm size having a causal impact on growth.

Published in 2003 in: Scandinavian Journal of Economics, v. 105, 2, pp. 255-274

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  1. 25 March 2007
    No. 394 - Firm Size Distribution and Growth
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