Corporate Growth Convergence in Europe

It is widely believed that the implementation of the Single Market Programme in 1992 has had an impact on national markets in Europe, and some people have argued that it has induced a convergence in industrial structures across countries. Using a newly available database, however, covering nearly every firm above 100 employees in 14 European countries over the time period 1994 to 1998, we do not find strong evidence for 'convergence' in manufacturing in Europe. 'Full' convergence in corporate sizes within industries is unambiguously rejected by the data, although there may be some industries where some form of conditional convergence is observed. A Gibrat process best describes the growth of very large and mature firms; but smaller and younger firms depart from this prediction. While we can identify significant correlates of growth such as firm size, age or the internal organization of the firm, most of the variation in corporate growth remains unpredictable.