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Investment Activity and the Exit Decision

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  • Deily, Mary E
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    Abstract

    Using level data from the U.S. steel industry, this paper tests and finds support for the hypothesis that firms in a contracting industr y first disinvest from, and then close, their high-cost plants. An investment decision model is estimated using a panel data set composed of the major replacement investments made in forty-three steel plants during the years 1960-81. The results indicate that the firms disinvested from those plants are least likely to remain profitable in an environment of strong competition from imports, minimills, and stagnating domestic demand. Copyright 1988 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 70 (1988)
    Issue (Month): 4 (November)
    Pages: 595-602

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    Handle: RePEc:tpr:restat:v:70:y:1988:i:4:p:595-602

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Mark Roberts & Shawn Klimek & Timothy Dunne, 2004. "Entrant Experience and Plant Exit," Working Papers 04-12, Center for Economic Studies, U.S. Census Bureau.
    2. Feil, Jan-Henning & Musshoff, Oliver, 2013. "Modelling investment and disinvestment decisions under competition, uncertainty and different market interventions," Economic Modelling, Elsevier, vol. 35(C), pages 443-452.
    3. Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995. "The Survival of New Plants: Start-up Conditions and Post-entry Evolution," CEPR Discussion Papers 1203, C.E.P.R. Discussion Papers.
    4. Dunne, Timothy & Klimek, Shawn D. & Roberts, Mark J., 2005. "Exit from regional manufacturing markets: The role of entrant experience," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 399-421, June.
    5. Matthew P Fleischmann & David Prentice, 2000. "Strategy, Scale or Policy? Exit in the Australian Car Industry," Working Papers 2000.14, School of Economics, La Trobe University.
    6. Bruce Blonigen & Benjamin Liebman & Wesley Wilson, 2013. "Antidumping and Production-Line Exit: The Case of the US Steel Industry," Review of Industrial Organization, Springer, vol. 42(4), pages 395-413, June.
    7. Mano, Yukichi & Suzuki, Aya, 2013. "Industrial Development through Takeovers and Exits: the Case of the Cut Flower Exporters in Ethiopia," Discussion Papers 2013-05, Graduate School of Economics, Hitotsubashi University.

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