Firm size populations modeled through competition-colonization dynamics

J. M. Applegate, Adam Lampert

Research output: Contribution to journalArticlepeer-review

Abstract

The Firm Ecosystem Model is a dynamical model based on the empirical finding that firm characteristics, such as the tendency to innovate and competitive advantages, vary according to firm size. Firm dynamics leading to various population distributions are considered as a competition-colonization scenario in a spatially defined market, where firms of differing sizes are treated as separate species with different competition and colonization characteristics. Smaller firms, given adequate investment funds to innovate, are able to colonize available space more quickly than larger firms, and larger firms are assumed to have stronger competition characteristics and are able to outcompete smaller firms for occupied space. With startup and mortality parameters determined empirically, firm populations reach equilibria dependent on the values of the capital investment parameters. The model predictions provide a good qualitative fit to empirical data from the Business Dynamics Statistics database. Finally, we explore how alternative mortality or investment conditions affect the firm size distributions.

Original languageEnglish (US)
JournalJournal of Evolutionary Economics
DOIs
StateAccepted/In press - 2020

Keywords

  • Competition
  • Ecological dynamics
  • Firm dynamics
  • Firm size distributions

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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