Sources of variation in growth rate distribution: evidence from Korean, Japanese, and Chinese manufacturing firms

ABSTRACT

This study provides a detailed analysis of the growth rate distribution of firms and examines sources of variation in distributional properties. Exploring a large sample of manufacturing firms in Korea, Japan, and China over the period 2010–2017, this study observes heterogeneous properties in the growth rate distribution of groups of firms belonging to the same country, sector, year, and firm size class. Country effects are a major source of variation in distributional properties, particularly determining the growth rate variance and left width of the distribution. The central tendency and tail behaviour of the distribution mainly change over time. Size effects explain the right width of the distribution. However, inter-sectoral distributions do not differ significantly in terms of their distributional properties. This study contributes to understanding underlying growth dynamics of groups of firms, determined by a combination of various factors at different levels, and provides policy implications.

KEYWORDS:

• Growth rate distribution
• firm growth
• firm heterogeneity
• distributional property

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ In this sample, there is a low correlation between sales growth and employee growth at the firm level (correlation coefficient = 0.017). Moreover, the literature argues that even if individual firms have different growth dynamics between two variables, there is no significant difference in the shape of distributions of them (Coad 2009). Future work could examine the distribution of employment growth and compare it with the results of this study.

² According to Eurostat’s classification of manufacturing sectors (2-digit level of NACE Rev.2), the disaggregated sectors considered in this study are high-tech, medium-high-tech, medium–low-tech, and low-tech.

³ Firms with lower sales than the average sales of firms with 50 employees are classified as small firms. Those with lower (higher) sales than the average sales of firms with 250 employees are classified as medium (large) firms.