Exploring the processes of firm growth: Evidence from a vector auto-regression

This article offers many new insights into the processes of firm growth by applying a vector autoregression model to longitudinal panel data on French manufacturing firms. We observe the coevolution of key variables such as growth of employment, sales, gross operating surplus, and labor productivity growth. Preliminary results suggest that employment growth is succeeded by the growth of sales, which in turn is followed by growth of profits. Generally speaking, however, growth of profits is not followed by much employment growth or sales growth. Quantile regressions highlight some asymmetries between negative-growth and fast-growth firms.