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Growth of the Smallest: Determinants of Small Firm Growth During Strong Macroeconomic Fluctuations

2000; SAGE Publishing; Volume: 19; Issue: 1 Linguagem: Inglês

10.1177/0266242600191002

1741-2870

Aki Kangasharju,

Corporate Finance and Governance

AKI KANGASHARJU IS AN ECONOMIST AT Pellervo Economic Research Institute, Helsinki, Finland. The present paper investigates the determinants of small firm growth in Finland during the strong economic fluctuations of the years 1988- 1995. The paper uses longitudinal data on 26,057 owner-managers and their associated small firms. Results support the life-cycle effect of a firm, i.e. new firms have a higher growth probability than older ones, providing that the firms considered survive. In a similar vein, firms run by younger owner-managers have higher growth probability than those run by older counterparts. Results also indicate that economic fluctuations strongly affect the growth probability of small firms. On the other hand, results indicate that once corrected for the level effects, the probability of growth was affected by the firm and owner-manager characteristics virtually the same way over the entire business cycle.