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Exit from Declining Industries: "Shakeout" or "Stakeout"?

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  • Marvin B. Lieberman

Abstract

Data on 30 chemical products are used to examine the sequence of divestment in declining industries. Small firms and plants might be expected to close first, given lack of scale economies. However, recent theories suggest that large producers may have greater incentives to exit or cut capacity. Both predictions receive some empirical support. Small plants had higher rates of closure, and most exiting firms were small. Holding the influence of plant size constant, large multiplant firms were more likely to close individual plants.

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  • Marvin B. Lieberman, 1990. "Exit from Declining Industries: "Shakeout" or "Stakeout"?," RAND Journal of Economics, The RAND Corporation, vol. 21(4), pages 538-554, Winter.
  • Handle: RePEc:rje:randje:v:21:y:1990:i:winter:p:538-554
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