Friday, March 14, 2008

Gibrat's law

Gibrat's rule of proportionate growth is a rule defined by Robert Gibrat (1904-1980) stating that the size of a firm and its growth rate are independent. This is also applied to cities.

In other words, proportional change in the size of a company in an industry is the same for all such companies irrespective of their original size. If a company with sales of $10m doubles in size over a period of time, it is likely the same will happen for a company beginning with sales of only $1m.


This law is seen to hold for only some industries. Manufacturing has lot of examples where this is violated.

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