Innovation,firm size,and firm age

This paper uses a new data set on innovation output to assess the degree to which the level of innovation in manufacturing firms is influenced by firm size and firm age. Indicators of innovation output used are the number of new products introduced as a function of firm sales and the proportion of firm sales obtained from products first introduced in the previous five years. While the evidence is mixed, the results tend to indicate that it is possible to separate the effects of age and size in assessing the level of innovation. Both firm size and firm age tend to be inversely related to innovative output.     

Learning, experience, and firm size

The process of producer's learning by experience is characterized as a parameter-adaptive process, rather than an ad hoc specification, that includes the accumulated volume of output in the firm's cost function. Deviations from the neoclassical optimization conditions can be decomposed into learning and production variation components. In a given time period, the production level may be greater or less than the level associated with price equals marginal cost, depending on the learning value and the direction of the marginal risk of production. The uncertainty-based measure of elasticity of scale is presented and indicates that the traditional view that the presence of uncertainty can discourage the managerial decision to expand is restrictive.     

Profitability,uncertainty, and firm size

This paper examines the connections between variations in profit and loss rates among firms in small-firm and large-firm size classes as reflections of uncertainty. We find that, within industries, such variations are particularly great for firms in small-firm size classes, leading to operating policies for small firms best characterized as entrepreneurial. Large firms, in contrast, faced with less uncertainty in earning profit, appear to adopt policies that manifest an emphasis on strategic planning.The authors appreciate the helpful comments of John C. Woods, Bruce D. Philips, and anonymous referees on an earlier version of this paper. Data used in this study were developed under contract SBA-9216-AER-85 with the U.S. Small Business Administration. The authors alone are responsible for the results presented.     

Exports,borders, distance,and plant size

The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census microdata on plant shipments from the Commodity Flow Survey. We show that the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be farther than domestic destinations, and large plants tend to ship farther distances even to domestic locations compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.     

Heterogeneous ability,career choice and firm size

Entrepreneurial ability is the ability to innovate new products. Managerial ability is the ability to maintain the profitability of current operations. By assuming heterogeneous abilities of acquiring and maintaining an endogenous number of production processes, the model of this paper predicts a distribution of firm sizes, a diversity in the composition of R&D and chosen career. Firms conduct product improvement if and only if managerial ability is high relative to entrepreneurial ability. Individuals choose careers as either innovative entrepreneurs, managerial entrepreneurs or salaried employees depending on their abilities. An individual's entrepreneurial ability may not be high enough to choose a career as an innovative entrepreneur, but if managerial ability is sufficiently high, then a career as a managerial entrepreneur is optimal. Managerial ability has an effect on expected firm size if and only if the individual is a managerial entrepreneur.This material is based upon work supported by the Research Committee of the Rutgers Graduate School of Management. I wish to thank two anonymous referees for helpful suggestions.     

Flexible technology and firm size

This paper provides the first empirical examination of the relationship between the application of flexible technologies and the firm-size distribution. In particular, we test the hypothesis that implementation of flexible technologies has tended to promote small firms more than large firms. Based on a sample of 36 engineering industries and using two distinct time periods between 1976 and 1986 and two different measures of what constitutes a small firm, we find that the application of certain flexible technologies, such as numerically controlled machines, has led to an increased presence of small firms, while the use of other flexible technologies, such as programmable robots, is associated with a decreased presence of small firms over time.     

Financial constraints and firm dynamics

This study analyzes the effect of financial constraints (FCs) on firm dynamics. We measure FCs with an official credit rating, which captures availability and cost of external resources. We find that FCs undermine average firm growth, induce anti-correlation in growth patterns and reduce the dependence of growth volatility on size. FCs are also associated with higher volatility and asymmetries in growth shock distributions, preventing young fast-growing firms especially from seizing attractive growth opportunities and further deteriorating the growth prospects of already slow-growing firms, particularly if old. The sub-diffusive nature of the growth process of constrained firms is compatible with the distinctive properties of their size distribution.     

Geographic cluster size and firm performance

We examine whether there are increasing returns to locating in clusters—a fundamental premise of agglomeration theory. This premise is worth exploring because a) it has infrequently been studied; b) recent evidence suggests that diseconomies of agglomeration change over time and may alter the payoffs to firms located in clusters; and c) recent evidence suggests that there may be negative returns to agglomeration. We examine firm payoffs to clustering in the biotechnology industry, and consider five different measures of performance. Our results lend support to the view that there are increasing returns to cluster size, but also suggest that diseconomies of agglomeration play an increasingly important role as clusters evolve. We believe these results help in reconciling previous findings.     

Productivity and firm size in India

Are smaller firms more productive? Intuitively, while small firms have the advantage of more flexible management and lower response time to market changes, larger firms have the advantages of economies of scale, political clout and better access to government credits, contracts and licenses, particularly in developing countries. Using a panel dataset from a commercially available database of financial statements of manufacturing firms in India, we find that firms in the lowest quintile of the asset distribution that invest in research and have better liquidity are most productive. The Indian manufacturing sector, characterized by both large scale public and private firms as well as numerous smaller firms, provides an ideal setting. Our findings are robust to alternative definitions of size, alternative estimation methods and alternative estimates of total factor productivity.     

Entry,spending and firm size in a stochastic R&D race

A model is developed to explain participation and spending on R&D as a function of firm size. The R&D process is represented as an n-participant race with a Poisson incidence of success, where the winner takes all during some protection period. Four effects of scale are taken into account: a sunk fixed threshold cost of entry; a flow cost of expenditure for the duration of the race, which affects both the profitability of winning and the speed of development (the Poisson parameter), both with diminishing returns; allowance for an effect of firm size on the effectiveness (profit/cost) of development. The operational decision concerning the level and intensity of commitment in case of participation is modelled in a traditional fashion as the maximization of expected returns. The strategic decision whether or not to participate (at an optimal level and intensity) is modelled as a stochastic process of deliberation between different makers and influencers of decisions in the firm. The latter is to be seen as an introduction of the political and resource dependence views of organisations. The resulting model of R&D participation as a function of firm size is tested empirically on data from an R&D survey in the Netherlands.     

Exports,investment and production growth: A dynamic heterogeneous firm model with learning and entry costs

We analyze a firm’s joint decision to export and invest using a model that incorporates the essential features of self-selection and learning-by-exporting theories of firm-level dynamics. We calibrate the model to 2002–2007 Chilean manufacturing plant data and simulate it under different assumptions, finding that neither self-selection nor learning-by-exporting alone can adequately explain the observed cross-sectional relationship between firm level exports and capital, favoring instead a model that allows both mechanisms to work in tandem.     

Metropolitan innovation,firm size,and business survival in a high-tech industry

This paper contributes to the growing body of business survival literature that focuses on regional determinants of the hazard faced by firms. Using parametric survival analysis, we test the effects of regional innovation on exit likelihood in the US computer and electronic product manufacturing during the 1992–2008 period. The novelty of our approach is in conditioning the effects of metropolitan innovation on firm size. Estimation results suggest a negative relationship between metropolitan patenting activity and survival of firms that started with 1–3 employees. This effect decreases if companies grow. Establishments with more than 4 employees at start-up are insensitive to metropolitan innovation, although size of firms that started with 4–9 employees improves their survival chances. These findings indicate that local knowledge spillovers do not translate into lower hazard. The negative relationship indicates either a creative destruction regime or decisions of entrepreneurs to shut down existing ventures in order to pursue other opportunities.     

Board gender diversity and firm performance: The moderating role of firm size

This paper investigates the relationships among board gender diversity, firm performance, and firm size. Our paper provides new insights into the relationship between board gender diversity and firm performance by examining whether firm size alters the impact of board gender diversity on firm performance. We use a panel data from A-share-listed non-financial firms in China to examine the relationship during the period of 2007–2012. Our finding demonstrates that the gender diversity on the board has a positive impact on firm performance if and only if the value of firm size is less than some critical value. In addition, we also find that firm size may undermine the positive impact of board gender diversity on firm performance. This paper contributes to the literature by offering a contingency approach to examine the relationship between board gender diversity and firm performance as well as shedding light on the relationship in the context of a developing economy.     

Exchange rate fluctuations,firm size,and export behavior: an empirical investigation

In this paper, we examine how changes in the exchange rate and its volatility affect the export behavior of manufacturing firms. We also investigate whether both exchange rate changes and exchange rate volatility affect firms of different sizes differently. Applying the two-step system generalized method of moment estimator on our data for a sample of 221 Pakistani manufacturing firms, we find that the real exchange rate depreciation has positive impacts, whereas the exchange rate volatility has negative impacts on firms’ exports. We also find that compared to large-sized firms, small- and medium-sized exporting firms are more likely to benefit from currency depreciations. Yet, regarding the effect of exchange rate volatility, we find that the adverse impact of exchange rate volatility is weaker for large-sized firms as compared to small- and medium-sized firms. Our findings confirm the presence of nonlinearity in export-deterring (favoring) effects of exchange rate volatility (depreciation) on exporting behavior depending on firm size. Pakistan should design and implement export-favoring preferential policies by emphasizing on real exchange rate stabilization and providing incentives to large firms to come into being. Small- and medium-sized enterprises should develop such export strategies that help reduce their size disadvantages, particularly in managing exchange rate risks.     

The optimal size of the competitive firm

In this article a simple derivation of the optimal long-run size of the competitive firm is given under general assumptions about the organization of the enterprise, and in a world where production occurs only under constant or increasing returns to scale. To do this, only the basic notion of a firm as some form of central coordinating agency is relied on.     

Organizational capital,production factor resources,and relative firm size in strategic equity alliances

Access to complementary resources through strategic equity alliance networks is an important activity for both smaller and larger firms. In the literature, there is an intensive debate on the impact of alliance resources for smaller firms. We submit that the effect of alliance resources on the smaller firm financial performance depends on the attributes of these resources. Specifically, we argue that the attributes of partner organizational capital are negatively related and the attributes of partner production factor resources are positively related to the smaller firm financial performance. We test our theoretical framework by applying a longitudinal analysis to a dataset of 1730 firm-year observations of strategic equity alliances in the software industry in 25 countries over an 11-year period. We find support for our hypotheses, highlighting the critical importance of resource attributes for smaller firms in strategic equity alliance networks.     

Endogenous firm heterogeneity and the dynamics of trade liberalization

In this paper, we build a dynamic model with endogenous firm-level productivity that involves ex ante identical firms behaving differently in equilibrium. Heterogeneity arises in equilibrium as firms choose different dates to adopt a new technology. We investigate the effects of international trade on technological diffusion and show that trade has a generally positive impact on the equilibrium rate of adoption (and hence on firm-level productivity). In addition, the model can replicate the stylized fact that exporters are larger and more productive than non-exporters. Finally, we show how our model can be used to interpret the emerging empirical evidence on the firm-level productivity effects of CUSFTA.     

Bankruptcies,firm size and unemployment: A big bang theory of economic cycles

This paper analyses the impact of bankruptcies on unemployment in an economy characterised by no substitutability of labour. A computer simulation model is used to analyse its properties. Spectral analysis reveals the existence of cycles in unemployment. It is found that average unemployment tends to be lower the more flexible are wages and interest rates, provided both move anticyclically, and the more rapid is the speed with which existing firms expand. An economy characterised by small firms is found to be more stable with a tendency to a longer cycle than one characterised by large firms. However, given the assumptions we have made, it is also likely to be characterised by higher average unemployment.     

The effects of firm size and firm performance on CEO pay in Canada: A Re-Examination and Extension

Using insights from academic and practitioners' perspectives and recent data, this paper extends the literature by using pay variables that are typically used by practitioners, including those not studied in previous academic research. Consistent with previous findings, firm size, measured by three-year average revenues, has strong effects on CEO pay. However, the relationship is not the same for firms of different sizes. Revenue elasticity is strong among small companies and disappears for medium and large companies. Firm performance, measured by accounting-based measures (return on assets and return on equity), and market-based measures (total shareholder return and shareholder value), have little effects on CEO cash compensation, but strong positive effects on equity compensation. Implications for research and practice are discussed.