IDEAS home Printed from https://ideas.repec.org/p/ptu/wpaper/w200301.html
   My bibliography  Save this paper

Founding Conditions and the Survival of New Firms

Author

Listed:
  • Pedro Portugal
  • P.A. Geroski

Abstract

This paper explores the effects that founding conditions have on the survival of new firms. A regression model which allows us to examine the role played by a number of different features of founding conditions on survival rates was estimated. The effect of founding conditions is estimated taking also into account that survival may be affected by current market conditions. Further, the model allows the effects of founding conditions to be transitory, and provides a way to assess how long such effects last. Using data on 118,114 Portuguese new firms observed over the period 1983 – 1993, we find that founding effects are important determinants of exit rates, and in some cases, they are more important that current conditions. In most cases, founding effects seem to persist without much of an attenuation in their effect on survival rates for at least several years after the founding of the firm.

Suggested Citation

  • Pedro Portugal & P.A. Geroski, 2003. "Founding Conditions and the Survival of New Firms," Working Papers w200301, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w200301
    as

    Download full text from publisher

    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200301.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bunch, David S & Smiley, Robert, 1992. "Who Deters Entry? Evidence on the Use of Strategic Entry Deterrents," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 509-521, August.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    3. Murray Z. Frank, 1988. "An Intertemporal Model of Industrial Exit," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 333-344.
    4. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
    5. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    6. B. Curtis Eaton & Richard G. Lipsey, 1980. "Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 721-729, Autumn.
    7. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 671-698.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmanuelle Fortune-Devlaminckx & Josef Haunschmied, 2010. "Diversity of firm’s life cycle adapted from the firm’s technology investment decision," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(4), pages 477-489, December.
    2. José Mata & Pedro Portugal, 2000. "Closure and divestiture by foreign entrants: the impact of entry and post‐entry strategies," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 549-562, May.
    3. Karl Wennberg & Karin Hellerstedt, 2011. "Evolution of knowledge intensive firms: a sociogeographic demand side perspective," ERSA conference papers ersa10p1585, European Regional Science Association.
    4. Jeffrey R. Campbell & Jonas D. M. Fisher, 2004. "Idiosyncratic Risk and Aggregate Employment Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 331-353, April.
    5. Prantl, Susanne, 2003. "Bankruptcy and Voluntary Liquidation: Evidence for New Firms in East and West Germany after Unification," ZEW Discussion Papers 03-72, ZEW - Leibniz Centre for European Economic Research.
    6. Erzo G. J. Luttmer, 2004. "The size distribution of firms in an economy with fixed and entry costs," Working Papers 633, Federal Reserve Bank of Minneapolis.
    7. Arjen van Witteloostuijn, 1998. "Bridging Behavioral and Economic Theories of Decline: Organizational Inertia, Strategic Competition, and Chronic Failure," Management Science, INFORMS, vol. 44(4), pages 501-519, April.
    8. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    9. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    10. Das, Sanghamitra & Srinivasan, Krishna, 1997. "Duration of firms in an infant industry: the case of Indian computer hardware," Journal of Development Economics, Elsevier, vol. 53(1), pages 157-167, June.
    11. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2002. "The Post-entry Size Adjustment of New small Firms," LEM Papers Series 2002/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    12. Anna Maria Ferragina & Fernanda Mazzotta & Erol Taymaz & Kamil Yilmaz, 2013. "The Impact Of Fdi On Firm Survival And Employment: A Comparative Analysis For Turkey And Italy," ERSA conference papers ersa13p1211, European Regional Science Association.
    13. Kattuman, Paul A., 1996. "On the size distribution of businesses of large enterprises: UK manufacturing," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 479-494, December.
    14. Li Yu & Peter F. Orazem & Robert W. Jolly, 2010. "Why Do Rural Firms Live Longer?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(3), pages 669-688.
    15. John Sutton, 1996. "Gibrats Legacy," STICERD - Economics of Industry Papers 14, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    16. Susanne Prantl, 2000. "Post-Entry Selection Among Newly Founded Firms in East and West Germany after Unification: A Competing Risk Model with Forced Bankruptcy Liquidations and Voluntary Liquidations," Econometric Society World Congress 2000 Contributed Papers 1602, Econometric Society.
    17. Colombo, Massimo G. & Delmastro, Marco & Grilli, Luca, 2004. "Entrepreneurs' human capital and the start-up size of new technology-based firms," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1183-1211, November.
    18. Pehr-Johan Norbäck & Ayça Tekin-Koru & Andreas Waldkirch, 2015. "Multinational Firms and Plant Divestiture," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 811-845, November.
    19. Oscar Gutiérrez & Francisco Ruiz-Aliseda, 2011. "Real options with unknown-date events," Annals of Finance, Springer, vol. 7(2), pages 171-198, May.
    20. Elsa Morais Sarmento & Alcina Nunes, 2011. "Survival dynamics in Portugal, a regional perspective," ERSA conference papers ersa10p1313, European Regional Science Association.

    More about this item

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ptu:wpaper:w200301. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: DEE-NTD (email available below). General contact details of provider: https://edirc.repec.org/data/bdpgvpt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.