Scaling behavior in economics: I Epirical results for company growth

Luis A Nunes Amaral, Sergey V. Buldyrev, Shlomo Havlin, Heiko Leschhorn, Philipp Maass, Michael A. Salinger, H. Eugene Stanley*, Michael H R Stanley

*Corresponding author for this work

Research output: Contribution to journalArticle

157 Scopus citations

Abstract

We address the question of the growth of firm size. To this end, we analyze the Compustat data base comprising all publicly-traded United States manufacturing firms within the years 1974-1993. We find that the distribution of firm sizes remains stable for the 20 years we study, i.e., the mean value and standard deviation remain approximately constant. We study the distribution of sizes of the "new" companies in each year and find it to be well approximated by a log-normal. We find (i) the distribution of the logarithm of the growth rates, for a fixed growth period of one year, and for companies with approximately the same size S, displays an exponential form, and (ii) the fluctuations in the growth rates - measured by the width of this distribution σ1 - scale as a power law with S, σ1 ∼ S. We find that the exponent β takes the same value, within the error bars, for several measures of the size of a company. In particular, we obtain: β= 0.20 ±0.03 for sales, β = 0.18 ± 0.03 for number of employees, β= 0.18 ± 0.03 for assets, β= 0.18 ± 0.03 for cost of goods sold, and β= 0.20 ± 0.03 for property, plant, and equipment.

Original languageEnglish (US)
Pages (from-to)621-633
Number of pages13
JournalJournal de Physique II
Volume7
Issue number4
StatePublished - Dec 1 1997

ASJC Scopus subject areas

  • Atomic and Molecular Physics, and Optics
  • Engineering(all)
  • Physics and Astronomy (miscellaneous)

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    Amaral, L. A. N., Buldyrev, S. V., Havlin, S., Leschhorn, H., Maass, P., Salinger, M. A., Stanley, H. E., & Stanley, M. H. R. (1997). Scaling behavior in economics: I Epirical results for company growth. Journal de Physique II, 7(4), 621-633.