Firm Growth and Scaling of Growth Rate Variance in Multiplant Firms

While Gibrat's Law assumes that growth rate variance is independent of size, empirical work has usually found a negative relationship between growth rate variance and ï¬rm growth. Using data on French manufacturing ï¬rms, we observe a relatively low, but statistically signiï¬cant, negative relationship between ï¬rm size and growth rate variance. Furthermore, we observe that growth rate variance does not decrease monotonically the more plants a ï¬rm possesses, which is at odds with a number of theoretical models.Growth rate variance, Firm growth, Scaling relationship, Multiplant ï¬rms, Gibrat's Law