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Tangible and intangible sunk costs and the entry and exit of firms in Austrian Manufacturing

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  • Werner Hölzl

    ()
    (Vienna University of Economics & B.A.)

Abstract

The present paper provides further evidence on the importance of sunk costs as determinant of the turnover, entry, and exit of firms by studying the Austrian manufacturing industry using a 14-year panel . This study explicitly considers sunk costs related to investment in dedicated intangible assets such as investment relating to organizational and goodwill capital. The empirical results confirm the relevance of sunk costs as mobility barriers, .their symmetry in respect to entry and exit and suggest that the influence of sunk costs is robust to aggregation. Sunk costs relating to capital expenditure and to organizational capital are found to be symmetric. Sunk costs relating to advertising expenditures seem to be only barriers to entry but not mobility barriers. Industry growth and profitability growth are found to be asymmetric, having a positive influence on entry and a negative on exit. Export growth is found to reduce the turnover of firms and to have a negative effect on exit suggesting that the decision to export may be associated with substantial sunk costs.

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Bibliographic Info

Paper provided by Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness in its series Working Papers with number geewp33.

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Date of creation: Sep 2003
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Handle: RePEc:wiw:wiwgee:geewp33

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Keywords: Sunk costs; Mobility barriers; Austian Manufacturing; Symmetry of entry and exit barriers;

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Cited by:
  1. Werner Hölzl & Andreas Reinstaller, 2004. "The effect of technology and demand shocks on structural and industrial dynamics: Evidence from Austrian manufacturing," Working Papers geewp37, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.

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