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A Portrait of Entrants and Exits

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  • Baldwin, John R.

Abstract

Entry and exit are important phenomena. This paper reviews the evidence on the size of this process and its contribution to productivity and innovation. It then develops a detailed portrait of the characteristics of new firms that survive and those that fail. In doing so, it examines the type of competencies that are developed in both groups of firms. It asks which competencies are developed by new firms. In particular, it focuses on the innovative capabilities of new firms. It shows that small firms in general and entrants in particular are heterogeneous when it comes to their innovative activity. The types of innovative activity in which they are engaged vary widely. Some focus on research and development (R&D) and new products. Others focus on new technologies. Still others stress the development of human capital. In addition, this paper examines the competitive environment that new firms face and the connection between growth and innovation. It also examines the complementary skills that are employed by innovators. Finally, the paper focuses on the causes of failure in the firm population. It extends earlier work that finds that failing firms differ from surviving firms in terms of basic competencies-management, financial management and marketing capabilities.

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File URL: http://www5.statcan.gc.ca/olc-cel/olc.action?ObjId=11F0019M1999121&ObjType=46&lang=en&limit=0
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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 1999121e.

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Date of creation: 25 Feb 1999
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Handle: RePEc:stc:stcp3e:1999121e

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Web page: http://www.statcan.gc.ca
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Related research

Keywords: Business performance and ownership; Entry; exit; mergers and growth; Small and medium-sized businesses;

References

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  1. John Baldwin & Timothy Dunne & John Haltiwanger, 1994. "A Comparison of Job Creation and Job Destruction in Canada and the United States," NBER Working Papers 4726, National Bureau of Economic Research, Inc.
  2. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  3. Baldwin, John R. & Rafiquzzaman, Mohammed, 1995. "Selection versus evolutionary adaptation: Learning and post-entry performance," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 501-522, December.
  4. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  5. John C. Haltiwanger, 1997. "Measuring and analyzing aggregate fluctuations: the importance of building from microeconomic evidence," Review, Federal Reserve Bank of St. Louis, issue May, pages 55-78.
  6. Cohen, Wesley M & Klepper, Steven, 1996. "A Reprise of Size and R&D," Economic Journal, Royal Economic Society, vol. 106(437), pages 925-51, July.
  7. Cohen, Wesley M & Klepper, Steven, 1992. " The Tradeoff between Firm Size and Diversity in the Pursuit of Technological Progress," Small Business Economics, Springer, vol. 4(1), pages 1-14, March.
  8. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May.
  9. Samuel Hollander, 1965. "The Sources of Increased Efficiency: A Study of DuPont Rayon Plants," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258235x, December.
  10. Baldwin, John R. & Gellatly, Guy, 1998. "Are There High-tech Industries or Only High-tech Firms? Evidence from New Technology-based Firms," Analytical Studies Branch Research Paper Series 1998120e, Statistics Canada, Analytical Studies Branch.
  11. Bee Yan Aw & Xiaomin Chen & Mark J. Roberts, 1997. "Firm-level Evidence on Productivity Differentials, Turnover, and Exports in Taiwanese Manufacturing," NBER Working Papers 6235, National Bureau of Economic Research, Inc.
  12. Baldwin, John R., 1996. "Productivity Growth, Plant Turnover and Restructuring in the Canadian Manufacturing Sector," Analytical Studies Branch Research Paper Series 1995087e, Statistics Canada, Analytical Studies Branch.
  13. Liu, Lili, 1993. "Entry-exit, learning, and productivity change Evidence from Chile," Journal of Development Economics, Elsevier, vol. 42(2), pages 217-242, December.
  14. Pakes, A. & Ericson, R., 1990. "Empirical Implications Of Alternative Models Of Firm Dynamics," Papers 594, Yale - Economic Growth Center.
  15. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
  16. Baldwin, John R., 1997. "The Importance of Research and Development for Innovation in Small and Large Canadian Manufacturing Firms," Analytical Studies Branch Research Paper Series 1997107e, Statistics Canada, Analytical Studies Branch.
  17. Scherer, F M, 1992. "Schumpeter and Plausible Capitalism," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1416-33, September.
  18. Picot, Garnett & Baldwin, John R. & Dupuy, Richard, 1994. "Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts," Analytical Studies Branch Research Paper Series 1994071e, Statistics Canada, Analytical Studies Branch.
  19. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  20. Agarwal, Rajshree & Gort, Michael, 1996. "The Evolution of Markets and Entry, Exit and Survival of Firms," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 489-98, August.
  21. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
  22. Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E., 1998. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521633574, April.
  23. Baldwin, John R. & Johnson, Joanne, 1996. "Business strategies in more- and less-innovative firms in Canada," Research Policy, Elsevier, vol. 25(5), pages 785-804, August.
  24. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  25. Klepper, Steven & Miller, John H., 1995. "Entry, exit, and shakeouts in the United States in new manufactured products," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 567-591, December.
  26. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  27. Newman, Howard H, 1978. "Strategic Groups and the Structure-Performance Relationship," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 417-27, August.
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Cited by:
  1. Jim Levinsohn & Wendy Petropoulos, 2001. "Creative Destruction or Just Plain Destruction?: The U.S. Textile and Apparel Industries since 1972," NBER Working Papers 8348, National Bureau of Economic Research, Inc.
  2. Baldwin, John R. & Gellatly, Guy, 1998. "Are There High-tech Industries or Only High-tech Firms? Evidence from New Technology-based Firms," Analytical Studies Branch Research Paper Series 1998120e, Statistics Canada, Analytical Studies Branch.

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