Firm Dynamics Of International Joint Ventures In Shanghais Manufacturing Sector: Testing The Validity Of Gibrats Law

Abstract

How joint ventures (JVs) grow over time has important implications on government JV policies and enterprises decisions in JV formation. This paper studies JVs in the manufacturing industries of Shanghai by analyzing the empirical relationship between the size of JVs with their growth over time. Whether Gibrats Law can describe the dynamic behavior of JVs is tested by using the panel data of four Shanghai industries from 1989 to 1992. Two empirical results are obtained: (1) Small JVs are better in creating jobs than large JVs. (2) In terms of output growth, both small and large JVs follows a simple stochastic growth process which is more or less dictated by the Gibrats Law.