Study On The Dynamic Relationship Of Firm Growth, Productivity And Profitability

Since Adam Smith, the study of the growth of the firm has been two hundred years from the time, but really to carry out theoretical research of the growth of the firm was only a few decades. Professor Penrose, published "the Theory of the Growth of the Firm" in 1959, really laid the theoretical basis of modern theory of the growth of the firm. Economists, management scientists or entrepreneurs, who have never stopped thinking about the problem of the growth of the firm, The growth of firm is a dynamic process, and shows various dynamic characteristics, which is the integrated effect of surroundings and inter structure of the system. Therefore, to probe in-depth the growth of firm, we must take into account the dynamic nature of firm growth, with the mathematical model, building a dynamic process of firm growth.In this paper, our study based on the theory of the growth of the firm with lots of literature research, through research the dynamic relationship of firm growth and firm size, productivity and profitability, we put the company's problems on its own dynamic system to analysis, and further improve the growth of the firm of the Chinese manufacturing enterprises.Through researching the domestic and international literatures of the theory of the growth of the firm, we can see, the use of firm level panel data analysis is relatively scarce and only the use of static analysis of panel data, ignoring the problem of the dynamic firm growth. Secondly, most of these studies to analyze the productivity of China's industrial enterprises state through the decomposition of total factor productivity, less involved in the firm growth stages of the process the role of productivity. Thirdly, domestic researches lack of the study of the relationship between the firm growth and profitability. Therefore, this study combines the use of management, economics and natural science theories and methods, adhere to the theory and practice, give full play to the dynamic nature of panel data itself, skillfully applied regression analysis, PVAR model and system GMM estimation of measurement approach, focusing on the Chinese manufacturing enterprises firm size, productivity and profitability and the three aspects of the dynamic relationship between the growth of the firm issues.Following is the main contents and viewpoints:Firstly, from the characteristics of Chinese manufacturing industry to start our studies, we analyze the current number of China's manufacturing industry characteristics. (1), analysis the firm size of characteristics of listed companies of Chinese manufacturing industry, namely, total assets and net profit of statistical analysis, by analyzing the 2007, 2008 and 2009 financial data of listed manufacturing companies, we found that listed companies manufacturing firm size was "power curve", which unlike normal distributions, implies that most companies are below average, such a curve is characterized by a short "head", comprising a small set of companies with extremely large total assets or net profit, and drops off quickly to a long "tail". We also found that the firm size or profits of top 10 multi-national monopolies in three years, the industry is classified as black metal smelting and pressing industry sectors, some of the transportation equipment manufacturing; (2), then based industry association theory, from a macro perspective we use the national investment output tables in 2007, calculate the sensitivity coefficient and influence coefficient between the current Chinese manufacturing industries and other industries, and also a comprehensive analysis of various departments in the national economy status and role. The results show that the printing and paper manufacturing industry, educational and sports goods, chemical industry, metal smelting and rolling processing industry, fabricated metal products, general, special equipment manufacturing, communications equipment, computers and other electronic equipment and instruments meters, cultural and office machinery with high impact coefficients and sensitivity coefficients, coal mining and dressing industry, oil and gas industry, mining industry, metal and other mining industry, petroleum processing, coking and waste nuclear fuel and waste processing industry with high sensitivity coefficients and low influence coefficients, these industries have strong sensitivity and influencing skills to market changes and other industries. (3), the comparative analysis of productivity in Chinese manufacturing industry and U.S. manufacturing productivity, and gives labor productivity in Chinese manufacturing industry changes from 1999 to 2005. While international comparison, China's manufacturing efficiency has a wide gap between the advanced world's levels, but from a historical point of view, China's manufacturing productivity has made considerable progress. The quality of Chinese manufacturing competitiveness increased year by year, in 2010 global manufacturing competitiveness index ranked first. After the lowest point in the November 2008 of China Manufacturing Purchasing Managers Index (PMI), PMI index rose steadily, after March 2009 PMI index has been in more than 50%.Secondly, we use the total assets and operating income as a proxy variable to measure the firm size, by statistical analysis of China's listed manufacturing companies financial data from 1999 to 2009, found that the firm size of Chinese manufacturing enterprises listed companies are subject to the three-parameter Log-Logistic distribution. K-S test results show that, subject to the distribution, and gives Q-Q figure test. Gibrat first exploration the relationship between the growth of firm and firm size, we constructed the relationship model of the growth of firm and firm size, firm age model, according to Evans. We analysis from single element of the whole sample to regression analysis, the results show that, the relationship between the growth of firm and firm size was a significant negative correlation, the relationship between the growth of firm and firm age was a significant positive correlation. To test the robustness of the results, also carried out additional testing, conclusions remain basically unchanged.Thirdly, from the dynamic point of view we analysis the relationship between the growth of firm and productivity of China's listed manufacturing companies, which based on the panel data vector autoregressive (PVAR) model, also studied the variables impact on the growth of firm variable. (1), we use the Malmquist-DEA method to measure the productivity of China's manufacturing listed companies. Full sample decomposition results show that, from 2000 to 2009, annual average total factor productivity change index is less than 1, technical efficiency and scale efficiency change index annual average greater than 1, the pure technical efficiency change index annual average of less than 1, which reflecting China's manufacturing industry mainly depends on the scale of the industry to increase total factor productivity increases, that is relying on a lot of material and capital investment to maintain the growth of firm. In the manufacturing industry sector, C4 and C6 has a high productivity level, we also carried out these two sub-sectors of industry productivity measure. (2), we create a business model based on PVAR to analyze the relationship between the growth of firm and productivity, also study the impact of variables on the growth of firm. When give a positive impact to the current firm size, the current growth of firm did not change, a decline in the 2 period, after has a rapid increase period in the 3 period, followed drop to the lowest point of 4 period and 5 period, and then rose rapidly. This shows that firm size increases has a small negative impact on the growth of firm at the beginning, after three periods have a greater negative impact on the growth of firm, after five periods form a positive influence and help the latter part of growth of firm. Also give a positive impact to the current TFP, the growth of firm has fluctuated in a small range, decreased rapidly after five periods. That reflects the productivity have a certain impact on the growth of firm, but can not continue to promote the growth of firm, after a certain period of time, we should improve the productivity of firm momentum. Given a positive shock to the PECH in the current, the growth of firm volatility in the first four periods, after fourth period PECH has gradually increase the impact of the growth of firm. That reflect pure technical efficiency can not play a significant role in promoting growth of firm in the short term, after four periods will have the obvious positive effect. Improvement of technology will facilitate sustainable the growth of firm. Variance decomposition obtained from the table after 20 forecast periods, the system was stable. The growth of firm has significant influence to the other three variables after 20 forecast periods, relatively speaking, PECH effects of other variables is greater than firm size and TFP on the impact of each variable.Fourth, we use the quality dynamic advantages of panel data, from the dynamic point of view, analysis the relationship between the growth of firm and profitability. (1), analysis the current status of China's industrial profits from 1999 to 2009, China's listed companies of manufacturing industry average profitability increased year by year, the growth of standard deviation is not, indicating that differentiation of the profitability of the business is not serious. (2), we use the System-GMM method to construct the relationship model between the growth of firm and profitability. For comparative analysis, we also give the results of static analysis of panel data. We divided the firm age into four categories, to analysis the relationship between the two. Two-step system GMM estimation results show that, from the dynamic point of view the relationship in growth of firm, firm size profitability is different from the static analysis results. Firm size on the impact of growth of firm, has a change after 1 lag, and profitability has change after2 lags, these indicate that the independent variables on the dependent variable have the dynamic change. In order to discuss the robustness of the results, we carried out a robust analysis; the results reflect the basic conclusion unchanged.Fifth, we analysis the relationship among the firm growth, productivity and profitability, from the perspective of systematic view. First, from a statistical point of view, we explore the linkages between the productivity and profitability. We classified the data respectively according to the profitability and productivity, using statistical analysis the linkages between the two vaiables in various stages. On the other hand, we use the research methods of Chapter IV to study the relationship of the productivity and profitability. It was found that profitability may not be able to promote productivity, but productivity will be able to promote the improvement of profitability. Then, by time-division study on the firm growth data, we study the linkages between the productivity and profitability. The results show that the productivity growth impact in promoting enterprise profitability is greater than the impact on firm growth. In addition, both the improvement of productivity and profitability will greatly facilitate firm growth.The innovation of this paper is mainly reflected in the following areas:(1)In the research framework aspect, the paper analysis from the reality of growth of firm of China's listed manufacturing companies, followed by the firm size, productivity and profitability, the relationship between the three aspects and the growth of firm. And we take the lead from the dynamic perspective analysis the relationship between the growth of firm and the productivity, the profitability, by building models richer the theory of the growth of firm, so provides an important theoretical basis as to understand and master the law of the growth of firm.(2)The sample data time is span, on the one hand the application of empirical analysis of Chinese manufacturing listed company data between 1999-2009, on the other hand in the descriptive part of the paper used "China Statistical Yearbook" between 2000 -2010 and the world and the United States and other countries and industries Statistical Yearbook as of 2010; choose the firm size, productivity and profitability, which three aspects the dynamic relationship between the growth of firm, these aspects are most concerned about the manufacturing industry, we think that carry out the study is very important in theoretical and practical for the manufacturing industry.(3)This paper mainly use the Malmquist-DEA method estimated total factor productivity to characterize corporate productivity, decomposition of the pure technical efficiency change index as a proxy for measuring technological level, first establish the panel data VAR model, from the dynamic point of view analysis the relationship between the growth of firm and productivity, pure technology. Through using the impulse response functions and variance decomposition, we more intuitive understand the dynamic influence of productivity to the growth of firm.(4)We first use the system GMM estimation method to analysis the relationship between the growth of firm and profitability of the China's manufacturing listed companies, which is different from the previous simple, static analysis the relationships between the two aspects.(5) From complete and systematic point, study the relationship between firm growth, productivity, and profitability.(6)We studied a sample of financial data from Chinese listed companies, in the text made the corresponding robustness checks to ensure the conclusions robustness. Give full play to the advantages of panel data, a relatively new application of the theory on the panel data, such as the panel data cointegration, panel data unit root test, a more accurate analysis the relationship between the variables.