Firm Size Distribution and Growth

Patrizio Pagano () and Fabiano Schivardi

No 394, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: 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.

Keywords: firm size; , growth; R&D. (search for similar items in EconPapers)
JEL-codes: L11 L16 O30 O40 (search for similar items in EconPapers)
Date: 2001-02
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Citations: View citations in EconPapers (32)

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Journal Article: Firm Size Distribution and Growth* (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_394_01

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