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On Firm Growth in Networks

  • Communication
  • Mathematics


This paper is explorative in nature. Based on an empirical analysis of two different industrial settings (life sciences, LS; information and communication technologies, ICT), it investigates network growth and firm growth in networks. We find a remarkable correspondence between a few fundamental findings of the ‘old’ stochastic approach to the analysis of firm internal growth, and empirically observed patterns of firm external growth through collaborative agreements. We show that scale-free behavior in real-world industrial networks can be accounted for by a general and parsimonious model, originally developed by Herbert Simon in 1955, based on entry and proportional growth. However, relevant departures from the stochastic benchmark are revealed that cannot be ascribed to the effect of mergers and acquisitions (M&As) and growth autocorrelation. Moreover, different regimes of growth are found to be at work in the life sciences for originators versus developers of new business opportunities, reflecting the fact that growth is driven by specialization and division of labor in the processes of generation and attraction/development of technological opportunities.

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On firm growth in networks

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