This article presents an analysis of the growth patterns of the worldwide top 200 firms in the pharmaceutical industry. A test of the Gibrat's Law of Proportionate Effect is performed and we find, in line with previous literature, a violation concerning the variance of growth. Using disaggregated data on sub-markets, we are however able to show that this violation can be completely accounted for by a diversification effect, namely a scale relation between the number of sub-markets in which a firm is active and its size. To interpret these findings, we propose a stochastic branching model of firm diversification consistent with a notion of cumulative corporate competences
Gibrat's Law and Diversification
SECCHI, ANGELO
2006-01-01
Abstract
This article presents an analysis of the growth patterns of the worldwide top 200 firms in the pharmaceutical industry. A test of the Gibrat's Law of Proportionate Effect is performed and we find, in line with previous literature, a violation concerning the variance of growth. Using disaggregated data on sub-markets, we are however able to show that this violation can be completely accounted for by a diversification effect, namely a scale relation between the number of sub-markets in which a firm is active and its size. To interpret these findings, we propose a stochastic branching model of firm diversification consistent with a notion of cumulative corporate competencesI documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
