Kimya M. Kamshad

Firm Growth and Survival: Does Ownership Structure Matter?

The publication of the passive learning model of Jovanovic and subsequently the active exploration model of Ericson and Pakes led to a resurgence in research on firm growth and survival. Empirical work measuring the relationship of growth and survival relative to size and age uncovered a number of strong regularities, consistent with the new theoretical models and also with a rather broad class of models of which the above represent special cases. But recent theoretical work has shown that when the learning models are applied to the special case of the labor managed firm, most of the sharp empirical predictions derived for profit maximization are rendered indeterminate. Given the impact of ownership structure on the theoretical results of the learning models, we use a dataset of French producer cooperatives to determine whether firms of different ownership structures actually have substantially different growth and survival patterns. We find that French cooperatives survive and grow in very much the same way as has been found for U.S. firms, suggesting that the empirical regularities previously uncovered hold for a much broader class of firms. We are left to conclude that the underlying empirical growth and survival relationships continue to hold for firms with sharply differing ownership structures, and the theoretical models are attempting to explain these broad-based relationships by means of overly specific modeling.