Stochastic and strategic models of firm growth in the Greek food manufacturing
1995
Ruda, D.
The empirical evidence that has applied so far, which has tested the hypothesis of Gibrat's Law (the law of Proportionate Effect), shows in many cases that the hypothesis of this law is valid. This study argues that even in cases where the proposition of the law is valid, the random factors are those that determine the rate of growth, the latter being determined by strategic, structural and performance characteristics that refer to the firm and to the relevant market in which it operates. After the application of the law and the relevant tests (cointegration) that were used, it was proven that the hypothesis of the law was valid. Then, the analysis proceeded with the identification of a strategic model whose estimation provided evidence that the rate of growth is not determined by stochastic factors, but by strategic variables: both industry and firm level such as profitability, concentration, advertising, intensity, diversification, industry growth, initial firm size, market share, leverage, and capital to output ratio.
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