Sources of Firm Life-Cycle Dynamics: Differentiating Size vs. Age Effects / Lorenz Kueng, Mu-Jeung Yang, Bryan Hong.

Format:

Book

Author/Creator:

Kueng, Lorenz.

Contributor:

National Bureau of Economic Research.

Yang, Mu-Jeung.

Hong, Bryan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20621.

NBER working paper series no. w20621

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Sources of Firm Life-Cycle Dynamics

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

What determines firm growth over the life-cycle? Exploiting unique firm panel data on internal organization, balance sheets and innovation, representative of the entire Canadian economy, we study recent theories that examine life-cycle patterns for firm growth. These theories include organizational capital accumulation and management practices, financial frictions, learning about demand, and recent endogenous growth models with incumbent innovation. We emphasize the importance of differentiating between pure age effects of these theories and effects on size conditional on age. Our stylized facts highlight both empirical successes and shortcomings of current theory. First, models of organizational capital and innovation are broadly consistent with firm size correlations conditional on age but have difficulties matching the life-cycle dynamics of firm organization and innovation. Second, among theories we analyze, organizational capital and management practices are the most important determinants to explain intensive margin firm growth over the life-cycle. Third, although less important to explain intensive margin firm growth, financial frictions are an important determinant of firm exit, conditional on firm age.

Notes:

Print version record

October 2014.