Transcript Presentation Background 1

Diffusion and Imitation of Growth
Strategies in Firm Clusters
M. Gabriela Contreras
October 2010
Outline

Introduction

Research Question

Vocabulary

Data & Methodology

Expected Challenges

Questions & Feedback
Introduction

Rejuvenation of firm growth studies

Beyond Gibrat's Law


Existing literature focuses on factors (variables)
driving firm growth.
Focus on the how not the what
Introduction


Firms are typically understood as profit maximizers
However, firms may depart from this strategy and
become “conformists.”

Imitation

Changing strategies when profts fall below a
certain threshold
Hypotheses & Assumptions
AI) Firms are not profit maximizers.
A2)Firms have little information of the consumer demand
function of their competitors
HI) Firms imitate growth strategies of other firms within a
cluster.
HIa) Firms imitate growth strategies of wellperforming firms within a cluster.
Vocabulary
Firm- a small high- tech business with one or more
branches.
Cluster- a regional agglomeration of firms or firm
heardquarters.
Growth strategy- the method through which a firm decides
to grow, such as an increase in number of FTEs, mergers
& acquisitions.
Well- performing strategy- a growth strategy that leads to a
higher survival rate of a firm.
Data & Methodology

Data & Scope


Firm- level performance data for small high-tech
firms in Silicon Valley, CA

Number of employees

Mergers and acquisitions

Profits
Sources

Kauffman Database

Bureau of Labor Statistics

Small Business Advocacy
Data & Methodology

Methodology

Imitation of a growth strategy



Bayesian Networks
Causality of a firm engaging in a growth
strategy
Success of a growth strategy*

Survival Analysis Model

Censor on firm growth strategy

Probability of “death” of a firm given a set of
time- dependent covariates
* First pass is to evaluate plain imitation behavior
Expected Challenges

Data availability:

Kauffman data available for 3 years


LEEM Database is not accessible


No geographical identifiers
Best database out there!
Cohort choice

Based on expected data availability

Geography- based clusters of industries
Questions for the Audience

Data sources

Methodology

On-going related work?
Questions
Bibliography
Beaudry, C., & Swann, G.M.P. (2009). Firm growth in industrial clusters of the United
Kingdom. Small Business Economics, 32, 409-424.
Bonaccorsi, A., & Giannangeli, S. (2010). One or more growth processes? Evidence from new
Italian firms. Small Business Economics.
Coad, A. & Rao R. (2008). Innovation and firm growth in high-tech sectors: A quantile
regression approach. Research Policy, 37, 633-648.
Stam, Erik. (2010). Growth Beyond Gibrat: firm Growth Processes and Strategies. Small
Business Economics. 35, 129-135
Parker, S.C., Storey D.J, Van Wittelosstuijn A. (2010). What happens to gazelles? The
importance of a dynamic management strategy. Small Business Economics.
Wiklund, J., Patzelt, H., & Shepherd, D.A. (2009). Building an integrative model of small
business growth. Small Business Economics. 32, 351-374.