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Age, diversification and survival in the German machine tool industry, 1953-2002

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  • Alex Coad
  • Christina Guenther

Abstract

We focus on the relationship of age and diversification patterns of German machine tool manufacturers in the post war era. Based on trade journals we track the entire firm populations' product portfolio development throughout each firm's lifetime. We distinguish between 'minor diversification' and 'major diversification', where these two concepts refer to adding a new product variation within a familiar submarket, or expanding the product portfolio into new submarkets. Our analysis reveals four main insights. First, we observe that firms have lower diversification rates as they grow older, and that eventually diversification rates even turn negative for old firms on average. Second, we find that product portfolios of larger firms tend to be more diversified. Third, with respect to consecutive diversification activities, quantile autoregression plots show that firms experiencing diversification in one period are unlikely to repeat this behavior in the following year. Fourth, survival estimations reveal that diversification activities reduce the risk of exit controlling for various additional firm and industry specific fixed effects and business cycles. These results are interpreted using the Penrosean growth theory.

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Bibliographic Info

Paper provided by Philipps University Marburg, Department of Geography in its series Papers on Economics and Evolution with number 2011-23.

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Length: 30 pages
Date of creation: 03 Jan 2012
Date of revision:
Handle: RePEc:esi:evopap:2011-23

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Related research

Keywords: Diversification; industry evolution; firm age; firm growth; machine tools;

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  9. Guido Buenstorf & Christina Guenther, 2007. "No place like home? Location choice and firm survival after forced relocation in the German machine tool industry," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2007-053, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  10. Alex Coad & Agustí Segarra & Mercedes Teruel, 2010. "Like milk or wine: Does firm performance improve with age?," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2010-10, Xarxa de Referència en Economia Aplicada (XREAP), revised Sep 2010.
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  13. Joao Pedro Azevedo, 2004. "GRQREG: Stata module to graph the coefficients of a quantile regression," Statistical Software Components, Boston College Department of Economics S437001, Boston College Department of Economics, revised 17 Mar 2011.
  14. Coad, Alex, 2010. "Investigating the exponential age distribution of firms," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 4(17), pages 1-30.
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