We find that the kurtosis of firm growth rates increases with firm size. This indicates that diversification is not uniform and even large firms are subject to concentrated risks which carries stronger aggregate implications. We propose a model of customer concentration and show how aggregate fluctuations are driven by a combination of granularity and concentration. Shocks are amplified only if the largest firms also have high levels of customer concentration. The mechanism is straightforward. Larger firms diversify sales risk by selling to more customers. However, customer concentration limits diversification and increases tail risks. This explains the observed larger volatility of small firms and the heavier tails for larger firms.
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