DP1203 The Survival of New Plants: Start-up Conditions and Post-entry Evolution

Author(s): Paulo Guimaraes, José Mata, Pedro Portugal
Publication Date: June 1995
Keyword(s): Duration, Entry, Survival
JEL(s): L11, L60
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1203

This paper examines the longevity of entrants. We find size to be an important determinant of the chances of survival, this being particularly relevant to de novo entrants as compared to entry by established firms. Current size is also found to be a better predictor of failure than initial size. Moreover, our findings indicate that, after controlling for size differences, past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period. Finally, new plants are more likely to live longer if they enter growing industries or industries with little entry activity.