Firm size and firm growth rate distributions—The case of Denmark
Correspondence: Toke Reichstein, Innovation Studies Centre, Tanaka Business School, Imperial College London South Kensington Campus, London SW7 2AZ, UK. e-mail: t.reichstein{at}imperial.ac.uk.
Correspondence: Morten Berg Jensen, IKE Group, Department of Business Studies, Aalborg University Fibigerstraede 4, DK-9220 Aalborg Oe, Denmark. e-mail: mbj{at}business.aau.dk.
There has been a recent renewed interest in the study of firm size distributions and firm growth rate distributions. Gibrat’s law assumes firm growth rates are independent and identically distributed and that size is determined by a first-order integrated process, leaving the size distribution log-normal. This article analyzes these distribution patterns in an empirical context, questioning the foundation of this model. In a cross-section analysis of four industries using Danish data, we show that the foundation and the outcome of Gibrat’s law are empirically far-fetched. In particular, significant deviations from normality are found.