Interdependencies in the Dynamics of Firm Entry and Exit
AbstractThis paper investigates the dynamics of firm entry and exit with a focus on differences between industrial sectors. The paper discusses how entry and exit rates in industrial sectors are affected by previous exit and entry rates. Economic theory presents two different approaches to how entry and exit of firms are interrelated to each other, the multiplier effect and the competition effect. This paper intends to investigate which force that is the predominant one. The empirical analysis is based on data for 25 Swedish manufacturing industries at the 2-digit SIC-level, for firms with more than five employees during the period 1991-2000. A dynamic panel data approach as suggested by Anderson and Hsio (1981) and Arellano and Bond (1991) are used in estimating the relationships. The empirical results find some evidence of the multiplier effect being the predominant effect explaining entry while competition effects are more important for explaining exit patterns.
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Bibliographic InfoPaper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 28.
Length: 30 pages
Date of creation: 18 Mar 2005
Date of revision:
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Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
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More information through EDIRC
Entry; exit; dynamic panel data;
Other versions of this item:
- Kristina Nyström, 2007. "Interdependencies in the Dynamics of Firm Entry and Exit," Journal of Industry, Competition and Trade, Springer, vol. 7(2), pages 113-130, June.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-03 (All new papers)
- NEP-COM-2005-04-03 (Industrial Competition)
- NEP-ENT-2005-04-03 (Entrepreneurship)
- NEP-IND-2005-04-03 (Industrial Organization)
- NEP-TID-2005-04-03 (Technology & Industrial Dynamics)
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.:
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