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The determinants of firm exit in the French food industries

  • Pierre Blanchard

    (Université Paris Est, ERUDITE, Université Paris Est Créteil, 94010 Créteil, France)

  • Jean-Pierre Huiban


    (INRA, UR 1303 ALISS, 65 boulevard de Brandebourg, 94205 Ivry-sur Seine cedex, and ERUDITE, Université Paris Est Créteil)

  • Claude Mathieu

    (Université Paris Est, ERUDITE, Université Paris Est Créteil, 94010 Créteil, France)

A semi-parametric approach is used to estimate firm propensity to exit. The unobserved individual productivity of a firm is first estimated using the Ackerberg et al. (2006) approach and then introduced as a determinant of firm exit in conjunction with other variables that may serve as barriers to exit, including the firm’s level of sunk costs and the industry concentration. Using an unbalanced panel of data for 5,849 firms in French food industries from 1996 to 2002, we find a significantly negative relationship between a firm’s probability to exit and its individual efficiency and age. In addition to validating these well-known results, we also show that the level of sunk costs may be an important barrier to exit. Ultimately, the relationship between the propensity to exit and the industry level of concentration contains a turning point: the relationship is at first increasing but then becomes decreasing.

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Article provided by INRA Department of Economics in its journal Review of Agricultural and Environmental Studies.

Volume (Year): 93 (2012)
Issue (Month): 2 ()
Pages: 193-212

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Handle: RePEc:rae:jourae:v:93:y:2012:i:2:p:193-212
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