Times are a Changin'? The Emergence of New Firms and Rank Reshuffling

Young firms are known to grow at a faster rate than incumbents. With administrative firm data from Germany, we show that the higher growth rates indeed translate into upward mobility within the sector-specific firm size distribution. Young firms are therefore not only able to catch up with incumbents, but also able to grow larger in absolute values. Recentered influence function regression results reveal that young firms cause significant rank mobility within the stock of firms, which even holds when the local skewness of the firm size distribution is accounted for. The results clearly indicate a Schumpeterian growth process where young firms challenge established ones.