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Founding conditions and the survival of new firms

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  • P. A. Geroski
  • José Mata
  • Pedro Portugal

Abstract

We analyze the effects of founding conditions on the survival of new firms. Based on arguments from several theoretical perspectives, namely economics, organizational ecology, and the resource‐based view of the firm, we develop hypotheses that relate the survival of firms to the conditions confronted by firms at each moment and to those prevailing at the time of founding. We develop an empirical model that allows the effects of founding conditions to be transitory and estimate how long such effects last. The results of estimating such a model indicate that founding effects are important determinants of exit rates. Moreover, in most cases, their effect on survival seems to persist with little attenuation for several years following the founding of the firm. Overall, our findings suggest that there is no absolute superiority of any of the aforementioned theoretical perspectives over the others, and there are important elements in all of them to explain the survival of firms. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • P. A. Geroski & José Mata & Pedro Portugal, 2010. "Founding conditions and the survival of new firms," Strategic Management Journal, Wiley Blackwell, vol. 31(5), pages 510-529, May.
  • Handle: RePEc:bla:stratm:v:31:y:2010:i:5:p:510-529
    DOI: 10.1002/smj.823
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    References listed on IDEAS

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    1. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    2. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    3. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
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