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The managerial limit to the growth of Firms revisited

By James P. Gander

Abstract

The Penrose Hypothesis that managerial resources will grow at a rate somewhat faster than that of firm size is tested along with the alternative steady-state hypothesis that both grow at the same rate. A dynamic firm model is used to motivate the study. U.S. Department of Labor, Bureau of Labor Statistics' Occupational Employment Statistics are used to measure managerial resources. Firm size is in terms of employment, or real value added, or real value of shipments. The data cover the period 2003–2006 and are used with a Cobb‐Douglas type log‐form growth function. The statistical results are quite strongly in favor of the Penrose Hypothesis, suggesting a managerial limit to the rate of growth of the firm. Copyright (C) 2010 John Wiley & Sons, Ltd.

DOI identifier: 10.1002/mde.1512
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