2009/13 | LEM Working Paper Series | |
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Corporate performances and market selection. Some comparative evidence |
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Giulio Botazzi, Giovanni Dosi, Nadia Jacoby, Angelo Secchi, Federico Tamagni |
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Keywords | ||
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firms heterogeneity, corporate growth, productivity, profitability, market selection, cross-country comparisons
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JEL Classifications | ||
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C14, D20, L10, L20, O47
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Abstract | ||
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Diverse theories of industry dynamics predict heterogeneity in
production efficiency to be the driver of firms' growth, survival and
industrial change, either through a direct link between efficiency and
growth, or through an indirect effect via profitabilities, as more
productive firms can enjoy higher profit margins which, under
imperfect capital markets, allow them to invest and grow more. Does
the empirical evidence bear such predictions? This paper explores the
dynamics of selection and reallocation through an investigation of the
productivity-profitability-growth relations at the firm
level. Exploiting large panels of Italian and French industrial firms,
we find that heterogeneity in efficiencies primarily yield persistent
profitability differentials, whereas the relationships of corporate
growth with either productivity or profitability appear much weaker,
if at all existent. This suggests that selection forces are much less
strong than usually assumed. The results robustly applies across different
industrial sectors and across the two countries.
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