This paper analyzes the survival and growth of franchised chains using an unbalanced panel dataset that covers about 1000 of them each year from 1980 to 2001. We do this in part because franchised chains are an important segment of the retail sector, which has received relatively little attention in this literature. More importantly, however, these chains are exactly the type of single-product entities that models of firm dynamics are about, which in turn means we can test the implications of the models more directly. Finally, we have data on chain characteristics, and our relatively long panel dataset allows us to control for “chain-level” fixed effects. We find that several chain characteristics affect the survival and growth of these chains. We also find that controlling for fixed effects has an important impact on some of the conclusions we reach. In particular, contrary to the established result that firm size reduces exit, we find that chain size increases the chain exit hazard rate when we control for chain-level fixed effects. This result and several other findings imply a tendency toward chain-specific sizes in our data. We argue that this size convergence arises more clearly in our context than in studies of manufacturing concerns exactly because of the single-product nature of franchised chains.
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Paper provided by School of Business, The George Washington University in its series Working Papers with number
0007.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Thomas F. Cooley & Vincenzo Quadrini, 1999.
"Financial Markets and Firm Dynamics,"
Working Papers
99-14, New York University, Leonard N. Stern School of Business, Department of Economics.
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Audretsch, D.B. & Klomp, L. & Thurik, A.R., 2002.
"Gibrat's Law: are the services different?,"
Research Paper
ERS-2002-04-STR Revision_, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
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