The Size Distribution of Chinese Manufacturing Firms: From the Perspective of Industry Life Cycle

Abstract

Using panel data of Chinese manufacturing firms between 2003 and 2008, this paper aims to examine the evolution of firm size distribution (FSD) as the industry goes through its life-cycle. The results reveal that during the life-cycle process, China’s manufacturing firms’ average size becomes larger then shrinks, and the degree of firm size heterogeneity and industry concentration increases all the time. Empirical results also indicate that the change rate of FSD is affected by firms’ net entry rate into industry. When net entry rate is higher, average firm size’s growth rate is smaller, while size heterogeneity and industry concentration rises more dramatically.