Firm size distribution under horizontal and vertical innovation

• Type: Article in International Scientific Journal
• Date: 2013

Authors

gil, pm (Author) FEP; figueiredo, f (Author) FEP

Journal

Title: Journal of Evolutionary Economics

Vol. 23 No. 1

Pages: 129-161

ISSN: 0936-9937

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 8 Citations

Scopus - 8 Citations

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Authenticus ID: P-002-1XK

DOI: 10.1007/s00191-011-0246-0

Abstract (EN): This paper studies the firm size distribution arising from an endogenous growth model of quality ladders with expanding variety. The probability distribution function of a given cohort is a Poisson distribution that converges asymptotically to a normal of log size. However, due to firm entry propelled by horizontal R&D, the total distribution-i.e., when the entire population of firms is considered-is a mixture of overlapping Poisson distributions which is systematically right skewed and exhibits a fatter upper tail than the normal distribution of log size. Our theoretical results qualitatively match the empirical evidence found both for the cohort and the total distribution, and which has been presented as a challenge for theory to explain. Moreover, by obtaining a total distribution with a gradually increasing average over a long time span, the model is able to address complementary empirical evidence that points to a total distribution subtly evolving over time.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 33