To Örebro University

Gibrat's law predicts that firm growth is purely random and should be independent of firm size. We use a random effects-random coefficient model to test whether Gibrat's law holds on average in the studied sample as well as at the individual firm level in the Swedish energy market. No study has yet investigated whether Gibrat's law holds for individual firms, previous studies having instead estimated whether the law holds on average in the samples studied. The present results support the claim that Gibrat's law is more likely to be rejected ex ante when an entire firm population is considered, but more likely to be confirmed ex post after market selection has "cleaned" the original population of firms or when the analysis treats more disaggregated data. From a theoretical perspective, the results are consistent with models based on passive and active learning, indicating a steady state in the firm expansion process and that Gibrat's law is violated in the short term but holds in the long term once firms have reached a steady state. These results indicate that approximately 70 % of firms in the Swedish energy sector are in steady state, with only random fluctuations in size around that level over the 15 studied years.

This paper examines the determinants of firm growth in the Swedish energy sector using a sample of 200 energy firms active from 2000 to 2010. The article has two aims. First, we seek to investigate whether there is reason to believe that the Swedish energy market will become more concentrated in the future, dominated by a few firms. That would be the result if, for example, large firms systematically and over time grew faster than the smaller firms in the Swedish market. Second, we investigate whether firm growth can mainly be explained by firm-specific variables, supporting Penrose's [1] suggestion that internal resources are the key determinants of firm growth rates. To this end, quantile regression is used in addition to ordinary least squares regression, to provide a more complete estimation of the growth distribution of firms conditional on different attributes. The results indicate that large firms do not grow faster than other firms in the sector, and that energy firms' internal resources are indeed the key determinants of firm growth in the Swedish energy industry.