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Market Concentration, Market Dynamism and Business Survival

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Author Info
Andrew Burke
Holger Görg
Aoife Hanley

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Abstract

The paper uses a unique dataset comprising the population of new ventures that enter the UK market in 1998. We argue that we would expect the effect of market concentration on firm survival to be different according to whether an industry is static (low entry and exit) or dynamic. In our empirical analysis we find support for this hypothesis. Industry concentration rates reduce the survival of new plants but only in markets marked by low entry and exit rates. Specifically, a 10 percent increase in the 5-firm concentration ratio or the Herfindahl index in a dynamic market, raises the survival rate of new ventures by approximately 2 percent. Our results suggest greater leniency towards more dominant firms in industries showing buoyant entry and exit rates.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2005-12.

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Length: 28 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:esi:egpdis:2005-12

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Related research
Keywords: new firms; start-ups; survival; dynamism; competition policy; industry concentration;

Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General

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This page was last updated on 2009-12-3.

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