The Dynamics of The Firm : In Search for a General Model

This paper describe a model from system theory that can be used as a base for better understanding of different situations in the firms evolution. This change model is derived from the theory of organic systems and divides the evolution of the system into higher complexity of the system structure in three distinctive phases. These phases are a formative phase, a normative phase and an integrative phase. After a summary of different types of models of the dynamics of the firm the paper makes a theoretical presentation of the model and how this model is adaptable for better understanding of the need for change in strategic orientation, organization form and leadership style over time.

Employment Protection Legislation and Firm Growth : Evidence from a Natural Experiment

A natural experiment is used to identify the causal relationship between employment protection legislation and fi…rm growth. The natural experiment occurred in Sweden in 2001, when an exemption made it possible for fi…rms with less than eleven employees to exclude two workers from the last-in-fi…rst-out principle when dismissing personnel. The estimated average treatment effect of the reform show that the number of employees increased with 0.135 percent in fi…rms with 5-9 employees relative to fi…rms with 10-15 employees, which corresponds to over 5,000 additional jobs per year created by the reform. Firms with ten employees, just below the size threshold, became 3.4 percent less likely to increase their workforce to a level surpassing the threshold, indicating that the last-in-…first-out rule prevented these …firms from growing. Thus, employment protection legislation seems to act as a growth barrier for small fi…rms.

Firm relocation and firm profits : Evidence from the Swedish wholesale trade sector

This study analyses the effects of firm relocation on firm profits, using longitudinal data on Swedish limtied liability firms and employing a difference-in-differnce propensity score method in the empirical analysis. Using propensity score matching, the pre-relocalization differneces between relocating and non-relocating firms are balanced. In addition to that, a difference-in-difference estimator is employed in order to control for all time-invariant unobserved heterogeneity among firms. For matching, nearest neighbour matching, using the one-, two- and three nearest neighbours is employed. The balanacing results indicate that matching achieves a good balance, and that similar relocating and non-relocating firms are being compared. The estimated average treatment on the treatment effects indicate thats relocations has a significant effect on the profits of the relocating firms. In other words, firms taht relocate increase their profits significantly, in comparison to what the profits would be had the firms not relocated. This effect is estimated to vary between 3 to 11 percentage points, depending on the lenght of the analysed period after relocation. 

Essays on firm dynamics in the Swedish wholesale trade sector

This thesis consists of a summary and five self-contained papers addressing dynamics of firms in the Swedish wholesale trade sector. Paper [1] focuses upon determinants of new firm formation in the Swedish wholesale trade sector, using two definitions of firms’ relevant markets, markets defined as administrative areas, and markets based on a cost minimizing behavior of retailers. The paper shows that new entering firms tend to avoid regions with already high concentration of other firms in the same branch of wholesaling, while right-of-the-center local government and quality of the infrastructure have positive impacts upon entry of new firms. The signs of the estimated coefficients remain the same regardless which definition of relevant market is used, while the size of the coefficients is generally higher once relevant markets delineated on the cost-minimizing assumption of retailers are used. Paper [2] analyses determinant of firm relocation, distinguishing between the role of the factors in in-migration municipalities and out-migration municipalities. The results of the analysis indicate that firm-specific factors, such as profits, age and size of the firm are negatively related to the firm’s decision to relocate. Furthermore, firms seems to be avoiding municipalities with already high concentration of firms operating in the same industrial branch of wholesaling and also to be more reluctant to leave municipalities governed by right-of-the- center parties. Lastly, firms seem to avoid moving to municipalities characterized with high population density. Paper [3] addresses determinants of firm growth, adopting OLS and a quantile regression technique. The results of this paper indicate that very little of the firm growth can be explained by the firm-, industry- and region-specific factors, controlled for in the estimated models. Instead, the firm growth seems to be driven by internal characteristics of firms, factors difficult to capture in conventional statistics. This result supports Penrose’s (1959) suggestion that internal resources such as firm culture, brand loyalty, entrepreneurial skills, and so on, are important determinants of firm growth rates. Paper [4] formulates a forecasting model for firm entry into local markets and tests this model using data from the Swedish wholesale industry. The empirical analysis is based on directly estimating the profit function of wholesale firms and identification of low- and high-return local markets. The results indicate that 19 of 30 estimated models have more net entry in high-return municipalities, but the estimated parameters is only statistically significant at conventional level in one of our estimated models, and then with unexpected negative sign. Paper [5] studies effects of firm relocation on firm profits of relocating firms, employing a difference-in-difference propensity score matching. Using propensity score matching, the pre-relocalization differences between relocating and non-relocating firms are balanced, while the difference-in-difference estimator controls for all time-invariant unobserved heterogeneity among firms. The results suggest that firms that relocate increase their profits significantly, in comparison to what the profits would be had the firms not relocated. This effect is estimated to vary between 3 to 11 percentage points, depending on the length of the analyzed period.