Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 264: Bursting into life: Firm growth and growth persistence by age

Alex Coad (), Sven-Olov Daunfeldt () and Daniel Halvarsson ()
Additional contact information
Alex Coad: University of Sussex, Postal: University of Sussex, Falmer,Brighton , BN1 9SL UK
Sven-Olov Daunfeldt: HUI Research and Dalarna University, Postal: HUI Research, 103 29 Stockholm, Sweden and Department of Economics, Dalarna University, 781 88 Borlänge, Sweden.
Daniel Halvarsson: The Ratio institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: Is firm growth more persistent for young or old firms? Theory gives us no clear answer, and previous empirical investigations have been hampered by a lack of detailed data on firm age, as well as a non-representative coverage of young firms. We overcome these shortcomings using a rich dataset on all limited liability firms in Sweden during 1997-2010, covering firms of all ages and information on registered start year. We find that sales growth for new ventures is characterized by positive persistence, whereas it quickly turns negative and remains negative as firms get older. It thus seems that the growth paths of older firms are buffeted around by environmental turbulence, and that older firms may have challenges in adapting their strategies to changing market conditions, whereas new firms experience an early burst of sustained growth.

Keywords: Firm age; growth rate autocorrelation; sales growth; learning-bydoing; minimum efficient scale

JEL-codes: D22; L25; L26

30 pages, December 23, 2015

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