PATTERNS OF GROWTH AND SIZE-LOCALIZED COMPETITION IN THE NEW-YORK-STATE LIFE-INSURANCE INDUSTRY, 1860-1985

This article investigates growth rates of life insurance companies doi ng business in New York State between 1860 and 1985. We test the valid ity of Gibrat's law, which states that the growth rate of an organizat ion is independent of size. We find that Gibrat's law does not hold in this complete organizational population. Rather, growth rates decline as a function of size, supporting the notion that the accrual of orga nizational inertia reduces the ability of organizations to capitalize on growth opportunities. We also test for an effect of size-localized competition (SLC) on organizational growth rates. Both a standard meas ure for SLC and an alternative measure that adjusts for population den sity show that competition between similarly-sized organizations decre ases the rate at which organizations grow. Results indicate that the a djusted SLC measure should be used in future research that models firs t-order density dependence and size-localized competition.