Growth volatility and size: a firm-level study

This paper provides a systematic cross-country investigation of the relation between a firm’s growth volatility and its size. For the first time the analysis is carried out using comparable and representative sets of data sourced by official business registers of an important number of countries. We show that there exists a robust negative relation between growth volatility and size with an average elasticity equal to −0.18. We check the robustness of this result against a number of potential sources of bias and in particular against the inclusion of firm age. We then interpret the estimated elasticity in terms of the underlying diversification structure of firms and we conclude discussing the relevance of our result with respect to the recent literature on granularity and on the effects of economic policies with heterogeneous firms.

Growth volatility and size: a firm-level study

Flavio Calvino
OECD Directorate for Science, Technology and Innovation