Firm size and short-term dynamics in aggregate entry and exit

Abstract

The interdependence between the sectorial rates of entry and exit is an established "stylised fact" in the research on industry dynamics. This paper argues that the size of firms and the reaction-adjustment period are important conditions that are missing from the empirical models typically used in this literature. I illustrate the effects of this omission on a panel of Spanish manufacturing industries. Estimates from errorcomponent systems of equations provide evidence of a conical revolving door phenomenon and of dynamic partial adjustments in the replacement-displacement of firms.

The determinants of exit in a developing country: core and peripheral regions

“…This is closely related to the "revolving door" phenomenon by which many firms exit only a few years after creation (Audretsch, 1995). The displacement effect of the new entrants has been empirically documented in developed countries both at the industry and regional levels (Arauzo-Carod et al, 2007;Manjón-Antolín, 2010). …”

Determinants of Entry and Exit: The Significance of Demand and Supply Conditions at the Regional Level

“…Thus, when new innovative firms enter, some existing businesses are displaced in a process of creative destruction (Schumpeter 1934;Robinson et al 2006). However, far from all, entry of new firms generates entrepreneur-driven Schumpeter-type creative destruction (Manjón-Antolin 2004). Instead, new firm formation is a heterogeneous phenomenon where innovative entrepreneurs are mixed with more normal entrepreneurs in the form of passive followers, over-optimist gamblers and people trying to find an alternative to unemployment (Vivarelli 2007).…”

Effects of Bank Branch Competition on Rural Firm Entry and Exit: Evidence from Hokkaido, Japan

“…Shapiro and Khemani [35] were the first to investigate the interdependence between firm entry and exit using the SUR method. Regarding the consideration for the simultaneity of entry and exit, Carree and Thurik [44] and Manjón-Antolín [45] use SUR and three-stage least 6 Bernard and Jensen [38] find that age, as well as size, significantly affect the probability of plant shutdown for US multinational manufacturing firms. [44] report that SUR is more efficient because it is not consistent under the alternative hypothesis of endogeneity, while 3SLS is.…”