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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. Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-33, C.V. Starr Center for Applied Economics, New York University.
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Citations

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Cited by:
  1. 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, Elsevier, vol. 23(4), pages 354-362.
  2. Margherita Balconi & Roberto Fontana, 2011. "Entry and innovation: an analysis of the fabless semiconductor business," Small Business Economics, Springer, Springer, vol. 37(1), pages 87-106, July.
  3. Coad, Alex, 2010. "Investigating the exponential age distribution of firms," Economics Discussion Papers, Kiel Institute for the World Economy 2010-12, Kiel Institute for the World Economy.
  4. repec:spo:wpecon:info:hdl:2441/6127 is not listed on IDEAS
  5. Roberto Fontana & Lionel Nesta, 2009. "Product Innovation and Survival in a High-Tech Industry," Review of Industrial Organization, Springer, Springer, vol. 34(4), pages 287-306, June.
  6. Peter Thompson, 2008. "The Iron and Steel Shipbuilding Data Set, 1825-1914: Sources, Coverage, and Coding Decisions," Working Papers, Florida International University, Department of Economics 0807, Florida International University, Department of Economics.
  7. 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, Halle Institute for Economic Research 9, Halle Institute for Economic Research.
  8. Mano, Yukichi & Suzuki, Aya, 2013. "Industrial Development through Takeovers and Exits: the Case of the Cut Flower Exporters in Ethiopia," Discussion Papers, Graduate School of Economics, Hitotsubashi University 2013-05, Graduate School of Economics, Hitotsubashi University.
  9. Hanas Cader & John Leatherman, 2011. "Small business survival and sample selection bias," Small Business Economics, Springer, Springer, vol. 37(2), pages 155-165, September.
  10. Roy Thurik & Jolanda Hessels & Isabel Grilo & Peter van der Zwan, 2009. "Entrepreneurial exit and entrepreneurial engagement," Scales Research Reports, EIM Business and Policy Research H200910, EIM Business and Policy Research.
  11. 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, Presses de Sciences-Po, vol. 97(5), pages 47-62.
  12. Luis F. Medrano E., 2012. "Patent Citations, University Inventor Patents, and Survival in the German Laser Source Industry (1960-2005)," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2012-009, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  13. Hielke Buddelmeyer & Paul H. Jensen & Elizabeth Webster, 2006. "Innovation and the Determinants of Firm Survival," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2006n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  14. Taylor, Margaret & Taylor, Andrew, 2012. "The technology life cycle: Conceptualization and managerial implications," International Journal of Production Economics, Elsevier, Elsevier, vol. 140(1), pages 541-553.

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