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Organization capital and firm life cycle

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  • Hasan, Mostafa Monzur
  • Cheung, Adrian (Wai-Kong)

Abstract

We hypothesize, and examine empirically, two types of association between organization capital and firm life cycle. Are firms with high organization capital more likely to be in a particular stage of their life cycle than firms with low organization capital? Are firms' transitions from one life cycle stage to another over time associated with how much they invest in organization capital? Our findings suggest that firms with high (low) organization capital are more likely to be in the introduction and decline (growth and maturity) stages. Our results also show that firms that invest more in organization capital (i.e., changes in organization capital) are less (more) likely to move to the introduction, shake-out and decline (growth and maturity) stages in the subsequent five years. Our results are robust to alternative specifications of organization capital, life cycle proxies and endogeneity concerns.

Suggested Citation

  • Hasan, Mostafa Monzur & Cheung, Adrian (Wai-Kong), 2018. "Organization capital and firm life cycle," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 556-578.
    • Handle: RePEc:eee:corfin:v:48:y:2018:i:c:p:556-578
    DOI: 10.1016/j.jcorpfin.2017.12.003
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    More about this item

    Keywords

    Organization capital; Firm life cycle;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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