Scaling Behavior in Economics: I. Empirical Results for Company Growth

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~a nd for companies with approximately the same size S, displays an exponential form~and (it) the fluctuations in the growth rates measured by the width of this distribution al scale as a power law with S, al +~S ~fl.We find that the exponent fl takes the = 0.18 + 0.03 for cost of goods sold, and fl = 0.20 + 0.03 for property~plant~and equipment.