Waiting for Godot? Success or failure of firms’ growth in a panel of Italian manufacturing firms

• Published in: Structural change and economic dynamics 2020-12, Vol.55, p.259-275
• Main Authors: Bartoloni, Eleonora, Baussola, Maurizio, Bagnato, Luca
• Format: Article
• Language: English
• Subjects: Corporate growth; Firm size distribution; Gibrat’s law
• ISSN: 0954-349X; 1873-6017
• DOI: 10.1016/j.strueco.2020.08.007

•We test whether the growth rate of SMEs contributes significantly to a modification of the size distribution of firms over a relatively long time horizon.•Although small firms tend to grow faster than larger firms, results suggest that Italian manufacturing enterprises fail to climb the size ladder; that is, they fail to progress to larger size classes.•Firms’ growth is positively affected by the development of entrepreneurial and managerial abilities, although this is not true for the group of tiny enterprises, for which the lack of a significant organizational structure represents a scaling-up threat.•Higher levels of indebtedness and a larger interest rate burden exert a negative effect on firms’ growth, although once the market selection has passed, better borrowing conditions may be in place, favouring firms’ growth.•Competitive factors, such as innovation and export intensity may stimulate upsizing, although their impact, in the long run, is still insufficient to cause a significant change in the size distribution of firms. Firms’ ability to compete in the global market crucially depends on their ability to innovate and to introduce new products or processes into the market. This typically requires more complex and structured business organization and ultimately the ability to grow. We use a representative panel of Italian manufacturing firms to investigate whether their pattern of growth entails such an ability. Although the estimates suggest that small firms grow faster than larger ones, we do not observe a significant change in the average size of companies at the end of the period under investigation. The greater propensity to grow shown by smaller firms is confined to the size class in which they are established. However, export intensity plays a significant role in affecting the size growth rate together with industry characteristics related to technological levels.