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The Shadow of Death: Analysing the Pre-Exit Productivity of Portuguese Manufacturing Firms

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Author Info
Carlos Carreira () (Faculty of Economics and GEMF, University of Coimbra)
Paulino Teixeira () (Faculty of Economics and GEMF, University of Coimbra)

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Abstract

In this study, we examine the pre-exiting productivity profile of mature firms relatively to survivors. We also evaluate how productivity affects the probability of exit along various dimensions. Our approach is an empirical one, and it is based on an unbalanced panel of Portuguese manufacturing firms covering a period of one decade. Our findings confirm that market selection forces low-productivity firms to exit, but there is also evidence that a sizeable portion of low-productivity firms do not shut down. Conversely, there is a non-negligible fraction of high-productivity firms that do actually close. In line, too, with some key theoretical predictions, exiting firms reveal a falling productivity level over a number of years prior to exit. Finally, our results from the survival model show that both low-productivity and small firms are much more likely to exit the market. Industry and macro environment were also found to have a non-negligible role on the exit of mature firms.

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Publisher Info
Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2008-05.

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Length: 38 pages
Date of creation: Jul 2009
Date of revision:
Publication status: Published in Small Business Economics. DOI: 10.1007/s11187-009-9221-7
Handle: RePEc:gmf:wpaper:2008-05

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Related research
Keywords: Pre-exit performance; Exit pattern; Productivity; Firm survival; Portugal;

Find related papers by JEL classification:
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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References listed on IDEAS
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    Other versions:
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    Other versions:
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    Other versions:
  10. Troske, Kenneth R, 1996. "The Dynamic Adjustment Process of Firm Entry and Exit in Manufacturing and Finance, Insurance, and Real Estate," Journal of Law & Economics, University of Chicago Press, vol. 39(2), pages 705-35, October.
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  12. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May. [Downloadable!] (restricted)
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    Other versions:
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