Testing the effect of firm performance on growth for the Chilean agribusiness
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Previous studies of the industrial organization field find that the relationship between firm
performance and growth is weak. The objective of this paper is to test this relationship at
different quantiles of the firm growth distribution. We also explore the effect of technology gaps
and export status on growth. For this, we use Penalized Quantile Regression with Fixed Effects
on 420 Chilean agribusiness firms. Key results show that performance, measured as technical
efficiency, has a significant and heterogeneous impact on revenue growth. The effect is stronger
on slow growing firms: one point increase in technical efficiency increases revenue growth by
1.2 % at the 0.10 quantile, the effect is 0.4 % at the 0.90 quantile. Hence, two key aspects shall be
considered in future studies of firm growth and performance: first, to use adequate indicators for
performance which capture the entirety of the production process, and second, to consider the
non-linearity of their relationship.