On the relationship between firm age and productivity growth

Abstract

For young firms, a clear relationship exists between firm age and productivity. Various studies have shown that the productivity level of new firms is below the average level, while the productivity growth rate of (surviving) young firms is above average. During the first few years, the average level of productivity tends to increase while the average growth rate tends to decrease. For elder, established firms, the relationship between age and productivity becomes less clear. Established firms show on average a positive growth rate, but whether this growth rate is related to the specific age of these firms is not well established. In this study we examine the relationship between the age of firms and their productivity growth, for establishes firms, where establishes firms are defined as firms of at least 10 years of age. Our research question is: to which extent are differences in productivity growth rates between individual firms related to firm age?