Bursting into Life: Firm Growth and Growth Persistence by Age
30 Pages Posted: 12 Jun 2015
Date Written: June 10, 2015
Is firm growth more persistent for young or old firms? Theory gives us no clear answer, and previous empirical investigations have been hampered by a lack of detailed data on firm age, as well as a non-representative coverage of young firms. We overcome these shortcomings using a rich dataset on all limited liability firms in Sweden during 1997-2010, covering firms of all ages and information on registered start year. We find that sales growth for new ventures is characterized by positive persistence, whereas it quickly turns negative and remains negative as firms get older. It thus seems that the growth paths of older firms are buffeted around by environmental turbulence, and that older firms may have challenges in adapting their strategies to changing market conditions, whereas new firms experience an early burst of sustained growth.
Keywords: Firm age; growth rate autocorrelation; sales growth; learning-by-doing; minimum efficient scale
JEL Classification: D22; L25; L26
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