Abstract:
There are many factors that could have a potential impact on the growth of a firm. In this research, we examined the relationship between the following economic elements: Size of the firm, Research and development expenditure, Advertisement cost, and the growth of Iranian firms of manufacturing industry. For this purpose, four digit ISIC standard data in manufacturing industry sector have been gathered (based on the published data of the Iran Statistics Center during 1997 to 2007). Then, the effects of the size of the firm, research and development and advertisement on the firm growth were tested. Results showed that research and development and advertisement expenditure factors have positive and significant impacts on the firm growth. In contrast, there was not any significant relation between the initial size of the firm and the growth. Based on the findings of this study, the Gibrat law was confirmed. In addition, the direct relation between the behavioral elements and firm performance was verified.
Machine summary:
"In this research, we examined the relationship between the following economic elements: Size of the firm, Research and development expenditure, Advertisement cost, and the growth of Iranian firms of manufacturing industry.
In the process of growth, firms are affected by different factors including: Age, Size, Level of competition among them, Level of available human capital, Advertisement expenditure, as well as the research and development (R&D) cost.
Therefore, the main aim of this paper is to examine the relationship between the size of the firm, the research and development (R&D) expenditure and advertisement cost on one hand and the growth of the firms of manufacturing industry in Iran, on the other.
To examine the relationship between the size of the firm, the research and development (R&D) expenditure and advertisement cost and the growth of the Iranian firms of the manufacturing industry, the published data of the Iran Statistics Center is used.
Using simultaneous equations system and three-round least square technique, Uri and Coate (Uri 1989) evaluated the relation between the concentration, advertisement, the research and development cost and performance in the American manufacturing industry.
However, if the results of the regression of model do not confirm the Gibrat law, two situations may happen: If b1<0, it means that there is a negative relation between the firm size in period t and its growth in period t+n and t.
Considering all of what was stated and paying attention to Iranian firm data limitations, we evaluate the effects of advertisement, research and development and size on the firm growth."