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The shadow of death: analysing the pre-exit productivity of Portuguese manufacturing firms

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  • Carlos Carreira

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  • Paulino Teixeira

Abstract

In this study, we examine the pre-exiting productivity profile of mature firms relatively to survivors. We also evaluate how productivity affects the probability of exit along various dimensions. Our approach is an empirical one, and it is based on an unbalanced panel of Portuguese manufacturing firms covering a period of one decade. Our findings confirm that market selection forces low-productivity firms to exit, but there is also evidence that a sizeable portion of low-productivity firms do not shut down. Conversely, there is a non-negligible fraction of high-productivity firms that do actually close. In line, too, with some key theoretical predictions, exiting firms reveal a falling productivity level over a number of years prior to exit. Finally, our results from the survival model show that both low-productivity and small firms are much more likely to exit the market. Industry and macro environment were also found to have a non-negligible role on the exit of mature firms.
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Suggested Citation

  • Carlos Carreira & Paulino Teixeira, 2011. "The shadow of death: analysing the pre-exit productivity of Portuguese manufacturing firms," Small Business Economics, Springer, vol. 36(3), pages 337-351, April.
  • Handle: RePEc:kap:sbusec:v:36:y:2011:i:3:p:337-351
    DOI: 10.1007/s11187-009-9221-7
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    More about this item

    Keywords

    Exit pattern; Firm survival; Portugal; Pre-exit performance; Productivity; D24; D21; L25; L26; L60;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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