Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119842
Authors: 
Yu, Xiaodan
Dosi, Giovanni
Grazzi, Marco
Lei, Jiasu
Year of Publication: 
2015
Series/Report no.: 
LEM Working Paper Series 2015/03
Abstract: 
This article explores the dynamics of market selection by investigating of the relationships linking productivity, profitability, investment and growth, based on China's manufacturing firm-level dataset over the period 1998 - 2007. First, we find that productivity variations, rather than relative levels, are the dominant productivity-related determinant of firm growth, and account for 15% - 20% of the variance in firms' growth rates. The direct relation between profitability and firm growth is much weaker as it contributes for less than 5% to explain the different patterns of firm growth. On the other hand, the profitability-growth relationship is mediated via investment. Firm's contemporaneous and lagged profitabilities display positive and significant effect on the probability to report an investment spike, and, in turn, investment activity is related to higher firm growth.
Subjects: 
Productivity
Market selection
Profitability
Investment spike
Firm growth
Chinese economy
JEL: 
D22
L10
L20
L60
O30
Document Type: 
Working Paper

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