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Firm Growth and Failure in Increasingly Competitive Markets Theory and Application to Hospital Markets

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Author Info

  • Lee Rivers Mobley
  • H. E. Frech

Abstract

Recent models of firm failure and growth have ignored demand factors. In this paper, we generalize these theoretical analyses to include demand factors in explaining failure and growth for heterogeneous firms in local markets facing imperfect but increasing competition. The model is then applied empirically to the hospital industry in California over the 1980s, during which time competition did intensify. We model the closure decision based on expectations of future growth, explicitly accounting for self selection and simultaneity. We find that both size and demand factors are important determinants of survival and growth

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File URL: http://www.tandfonline.com/10.1080/758540500
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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 1 (1994)
Issue (Month): 1 ()
Pages: 77-93

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Handle: RePEc:taf:ijecbs:v:1:y:1994:i:1:p:77-93

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Related research

Keywords: Closure; Growth; Survivor analysis; Hospitals; Scale economies; Competition; I11; L11; L31; L44; L84; O24;

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Cited by:
  1. Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, vol. 29(1), pages 87-109, January.
  2. Frech, Ted E, 1998. "Managed Care, Distance Traveled, and Hospital Market Definition," University of California at Santa Barbara, Economics Working Paper Series qt84x5q49q, Department of Economics, UC Santa Barbara.
  3. Lindrooth, Richard C. & Lo Sasso, Anthony T. & Bazzoli, Gloria J., 2003. "The effect of urban hospital closure on markets," Journal of Health Economics, Elsevier, vol. 22(5), pages 691-712, September.
  4. Lynk, William J., 1995. "The creation of economic efficiencies in hospital mergers," Journal of Health Economics, Elsevier, vol. 14(5), pages 507-530, December.
  5. Rexford E. Santerre & Debra Pepper, 2000. "Survivorship in the US hospital services industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(5), pages 181-189.
  6. Lee Mobley & W. David Bradford, 1997. "Behavioural differences among hospitals: it is ownership, or location?," Applied Economics, Taylor and Francis Journals, vol. 29(9), pages 1125-1138.

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