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Selection and Firm Survival: Evidence from the Shipbuilding Industry, 1825-1914

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  • Peter Thompson

    (Florida International University)

Abstract

Several theories of firm performance can explain the well known observation that survival is positively related to age. However, a more mundane explanation-selection bias driven by variations in firm quality-may also underlie the phenomenon. This paper employs a 90 year plant-level panel data set on the U.S. iron and steel shipbuilding industry of the nineteenth and early twentieth centuries to discriminate between the explanations. The shipbuilding industry exhibits the usual joint dependence of survival on age and size, but this dependence is eliminated after controlling for heterogeneity by using preentry experience as a proxy for firm quality. The evidence points to a dominant role for selection bias in creating the age dependence of survival. At the same time, preentry experience is found to have a large and extremely persistent effect on survival, and this finding is inconsistent with standard explanations for the role of preentry experience on firm performance. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

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

Volume (Year): 87 (2005)
Issue (Month): 1 (February)
Pages: 26-36

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Handle: RePEc:tpr:restat:v:87:y:2005:i:1:p:26-36

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  1. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
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  16. Peter Thompson, 2008. "The Iron and Steel Shipbuilding Data Set, 1825-1914: Sources, Coverage, and Coding Decisions," Working Papers 0807, Florida International University, Department of Economics.
  17. Steven Klepper, 2002. "The capabilities of new firms and the evolution of the US automobile industry," Industrial and Corporate Change, Oxford University Press, vol. 11(4), pages 645-666, August.
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Cited by:
  1. Margherita Balconi & Roberto Fontana, 2011. "Entry and innovation: an analysis of the fabless semiconductor business," Small Business Economics, Springer, vol. 37(1), pages 87-106, July.
  2. Luis F. Medrano E., 2012. "Patent Citations, University Inventor Patents, and Survival in the German Laser Source Industry (1960-2005)," Jena Economic Research Papers 2012-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. Guido Buenstorf & Ulrich Witt, 2006. "How Problems of Organisational Growth in Firms Affect Industry Entry and Exit," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 47-62.
  4. Buddelmeyer, Hielke & Jensen, Paul H. & Webster, Elizabeth, 2006. "Innovation and the Determinants of Firm Survival," IZA Discussion Papers 2386, Institute for the Study of Labor (IZA).
  5. repec:spo:wpecon:info:hdl:2441/6127 is not listed on IDEAS
  6. Jolanda Hessels & Isabel Grilo & Roy Thurik & Peter Zwan, 2011. "Entrepreneurial exit and entrepreneurial engagement," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 447-471, August.
  7. Lionel Nesta & Roberto Fontana, 2007. "Product Innovation and Survival in a High-Tech Industry," Sciences Po publications 2007-30, Sciences Po.
  8. Taylor, Margaret & Taylor, Andrew, 2012. "The technology life cycle: Conceptualization and managerial implications," International Journal of Production Economics, Elsevier, vol. 140(1), pages 541-553.
  9. 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.
  10. Coad, Alex, 2010. "Investigating the exponential age distribution of firms," Economics Discussion Papers 2010-12, Kiel Institute for the World Economy.
  11. Huynh, Kim P. & Petrunia, Robert J. & Voia, Marcel, 2012. "Duration of new firms: The role of startup financial conditions, industry and aggregate factors," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 354-362.
  12. Peter Thompson, 2008. "The Iron and Steel Shipbuilding Data Set, 1825-1914: Sources, Coverage, and Coding Decisions," Working Papers 0807, Florida International University, Department of Economics.
  13. Nicole Nulsch, 2014. "Is Subsidizing Companies in Difficulties an Optimal Policy? An Empirical Study on the Effectiveness of State Aid in the European Union," IWH Discussion Papers 9, Halle Institute for Economic Research.
  14. Hanas Cader & John Leatherman, 2011. "Small business survival and sample selection bias," Small Business Economics, Springer, vol. 37(2), pages 155-165, September.

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