Do the Largest Firms Grow the Fastest? The Case of U.S. Dairies

In order to answer the third question, do larger firms diversify more rapidly than
medium-sized firms, we examine the percent of agricultural sales from milk and dairy
products for the medium- and large-sized farms for each census. These statistics are
reported in Table 4. For each census, the distribution of farms is consistently more
specialized for the large-sized farms than for the medium-sized farms. Further, the
medium-sized farms diversify at a more rapid rate than do the large-sized farms. Thus,
the answer to the third question is no.

Firm Entry and Exit

Between each pair of censuses, approximately twice as many dairy firms exited the
industry as new firms entered. Over the 10-year period, cohorts 1-8 had ratios of exits to
entries ranging from 2.1 to 2.8. The average for cohorts 9-10 was just over 1.0. Only the
largest category had more entrants than exits. The correlation between exit/entry ratio
and cohort number was -0.78.

The distribution of new entrants was very different than the distribution of incumbent
farms. Their mean size was very large, falling between the means of incumbent cohorts 8
and 9 in 1997 and cohorts 9 and 10 in 2002. Their median size fell between the median
sizes of incumbent cohorts 4 and 5 in 1997 and cohorts 7 and 8 in 2002. Standard
deviations of both were a little below those of cohort 10. Skewness and kurtosis
coefficients were near the highest of any incumbent cohort. They were also highly
specialized when they entered the dairy industry; their distributions among sales classes
were very similar to the 1992 distribution of the largest incumbent cohort (see Table 4).

They also behaved differently over time. Between 1997 and 2002, there was little
change in the 1^st and 2^nd moments of the 1997 cohort of new entrants, but the 3^rd and 4^th

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