Industrial Development through Takeovers and Exits: the Case of the Cut Flower Exporters in Ethiopia
AbstractThe exit and takeover of firms influence the structure and economic efficiency of an industry. The existing literature suggests that firms gradually learn about their own productivity. Some stagnate and ultimately exit if they encounter unfavorable prospects; others survive and grow. This selection process implies that the probability of firm exit initially increases with firm age as learning progresses before it eventually falls as learning is completed. We use a firm-level panel of Ethiopia’s cut flower industry to confirm this theoretical implication. The empirical results also suggest that takeover improves productivity and profitability of average firms endowed with a favorable business environment.
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Bibliographic InfoPaper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2013-05.
Length: 39 p.
Date of creation: Jun 2013
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