James N. Giordano, Ph.D., Economics, Villanova University, 800 E. Lancaster Avenue, Villanova, PA 19085
Gibrat's Law of proportionate growth is tested for resistance by small firms in the less-than-truckload sector of the U.S. trucking industry. The law is rejected industry-wide in that (1.) smaller firms hauling less than 100 million ton-miles annually have higher and more variable growth rates than larger firms and (2.) the emerging size distribution of firms is lognormal only when the smaller firms are excluded. The law is similarly rejected within the class of smaller firms tested separately. In all cases, the findings are attributed primarily to the greater degree of untapped economies of scale which remain to be achieved by the smaller firms. The practical significance of such small firm resistance is that, when sustained, it implies a built-in socially beneficial deterrent to secularly rising market concentration. A corresponding implication, however, is that the more widespread and systematic that same resistance may be across industries, the more unlikely it is that Gibrat's Law will ever gain general recognition as a consistent industry-wide determinant of firm growth or market structure.