Quality Labels and Firm Survival in the Food Industry

Both industry and firm characteristics influence the survival of a firm in an industry over time. Aging, size, structure are factors often discussed in the literature, but public intervention effects - through public quality labeling for example - may also have an effect that is examined here. We use data on French firms producing cheese under public quality label or not over the period 1990-2006. We perform a nonparametric estimation using Kaplan-Meier estimators as well as proportional hazard rate models to assess the impact of such factors on firms survival. Our results confirm existing finding on firm survival determinants. We also shed light on the effect of public intervention into that industry. More precisely, our focus on public quality labeling in the French cheese industry shows that quality label reduces the risk of exiting for firms and more particularly for small firms. In other words, public intervention in this industry is well designed to increase the competitiveness of small firms enabling the coexistence on the market of both small and large firms.