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Like milk or wine: Does firm performance improve with age?

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  • Alex Coad

    ()
    (Max Planck Institute of Economics, Evolutionary Economics Group, Kahlaische Strasse 10, D-07745 Jena, Germany)

  • Agustí Segarra

    ()
    (Universitat Rovira i Virgili, Grup de Recerca d’Indústria i Territori, Avda. Universitat 1, 43204 Reus, Spain)

  • Mercedes Teruel

    ()
    (Universitat Rovira i Virgili, Grup de Recerca d’Indústria i Territori, Avda. Universitat 1, 43204 Reus, Spain)

Abstract

Our empirical literature review shows that little is known about how firm performance changes with age, presumably because of the paucity of data on firm age. For Spanish manufacturing firms, we analyse the firm performance related to firm age between 1998 and 2006. We find evidence that firms improve with age, because ageing firms are observed to have steadily increasing levels of productivity, higher profits, larger size, lower debt ratios, and higher equity ratios. Furthermore, older firms are better able to convert sales growth into subsequent growth of profits and productivity. On the other hand, we also found evidence that firm performance deteriorates with age. Older firms have lower expected growth rates of sales, profits and productivity, they have lower profitability levels (when other variables such as size are controlled for), and also that they appear to be less capable to convert employment growth into growth of sales, profits and productivity.

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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2010-10.pdf
File Function: First version, 2010
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File URL: http://www.pcb.ub.es/xreap/aplicacio/fitxers/XREAP2010-10.pdf
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Bibliographic Info

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2010-10.

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Length: 41 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
Handle: RePEc:xrp:wpaper:xreap2010-10

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
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Web page: http://www.pcb.ub.edu/xreap
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Related research

Keywords: firm age; firm growth; LAD; financial structure; vector autoregression;

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References

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Cited by:
  1. Stel, Nora & Naudé, Wim, 2013. "Public-Private Entanglement: Entrepreneurship in a Hybrid Political Order, the Case of Lebanon," IZA Discussion Papers 7795, Institute for the Study of Labor (IZA).
  2. Giorgio Barba Navaretti & Davide Castellani & Fabio Pieri, 2012. "Age and firm growth. Evidence from three European countries," Working Papers 1217, Department of Applied Economics II, Universidad de Valencia.
  3. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2010. "Are small firms more sensitive to financial variables?," Working Papers 2072/151623, Universitat Rovira i Virgili, Department of Economics.
  4. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.
  5. Michaela Fuchs, 2011. "How important are agglomeration effects for plant performance? Empirical evidence for Germany," ERSA conference papers ersa11p912, European Regional Science Association.
  6. Marco Capasso & Elena Cefis & Alessandro Sapio, 2013. "Reconciling quantile autoregressions of firm size and variance–size scaling," Small Business Economics, Springer, vol. 41(3), pages 609-632, October.
  7. José García-Quevedo & Francisco Mas-Verdú & Daniel Montolio, 2011. "What type of innovative firms acquire knowledge intensive services and from which suppliers?," Working Papers 2011/22, Institut d'Economia de Barcelona (IEB).
  8. Coad, Alex & Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2013. "Innovation and firm growth: Does firm age play a role?," Working Papers 2072/211886, Universitat Rovira i Virgili, Department of Economics.
  9. Alex Coad & Christina Guenther, 2012. "Age, diversification and survival in the German machine tool industry, 1953-2002," Papers on Economics and Evolution 2011-23, Max Planck Institute of Economics, Evolutionary Economics Group.

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