Why Do Firms Differ and How Does It Matter? A Revisitation

Abstract

It has been seventeen years since I published a paper (Nelson

1991) concerned with the determinants and consequences of firm

differences. I have been pondering the question of whether I now

have anything useful to say about it that I did not say then. I

dont know, but let me give it a try. I begin by reflecting on what

we might learn from studies of biological evolution about the

importance of narrative and qualitative observation in analysis of

the factors behind and consequences of firm differences. Then, I

turn to commentary and criticism of what I think has been the

dominant point of view (certain authors clearly are exceptions)

orienting the studies of firm differences and industrial dynamics

using the available longitudinal industry-firm data sets. Finally, I

lay out some of my own rethinking regarding the sources and

consequences of firm differences.