Firm Growth and Persistence of Chance: Evidence from Portuguese Microdata
ESTG, Instituto Politécnico de Leiria
Faculdade de Economia and GEMF, Universidade de Coimbra
Considering a dynamic firm growth model with serial correlation this work studies the effects of R&D activities and investment, both physical and R&D, on the growth of firms. The main hypotheses maintain that firms with a strong commitment to R&D have higher rate of growth and investment has a positive effect on firm growth. We investigate such relations with reference to an unbalanced panel data set of Portuguese manufacturing firms over the period 1990 to 2001. We find that a systematic tendency for smaller firms to grow more quickly is the main reason why firm growth is not entirely stochastic.
JEL Classification: L11, L13, C23.
Keywords: Firm growth, R&D, GMM system estimator.