Competition and entrepreneurs' human capital in small business longevity and growth
An analysis of data on a sample of small-scale manufacturers shows that a business is less likely to survive and grows slower the smaller the average price-cost margin in the industry in which it operates. The probability of survival is also smaller in import competing industries. So is the mean growth rate among survivors. We interpret this as evidence that small businesses are less likely to survive and grow slower in industries where the pressure of competition is stronger. Given competitive pressure and establishment characteristics, the probability of business survival and the expected growth rate conditional on survival both increase with entrepreneurial human capital. This is in the sense that the probability of business survival increases with the number of years of schooling and the number of years of business experience of the entrepreneur as does the expected growth rate conditional on survival. These results are consistent with another finding that unobservable influences on business hazard are correlated with those on growth. As a result, the effect of competition and entrepreneurial human capital on the growth of survivors would be biased for the effect of the same variables on the expected growth rate of a startup.
Volume (Year): 42 (2006)
Issue (Month): 5 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/FJDS20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/FJDS20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pakes, A. & Ericson, R., 1990.
"Empirical Implications Of Alternative Models Of Firm Dynamics,"
594, Yale - Economic Growth Center.
- Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
- Ariel Pakes & Richard Ericson, 1989. "Empirical Implications of Alternative Models of Firm Dynamics," NBER Working Papers 2893, National Bureau of Economic Research, Inc.
- Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
- Dunne, T. & Roberts, M.J. & Samuelson, L., 1988.
"The Growth And Failure Of U.S. Manufacturing Plants,"
1-87-5, Pennsylvania State - Department of Economics.
- Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1989. "The Growth and Failure of U. S. Manufacturing Plants," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 671-698.
- Evans, David S, 1987.
"Tests of Alternative Theories of Firm Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 95(4), pages 657-74, August.
- Steve J. Davis & John Haltiwanger, 1991.
"Gross job creation, gross job destruction and employment reallocation,"
Working Paper Series, Macroeconomic Issues
91-5, Federal Reserve Bank of Chicago.
- Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
- Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
- Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Jovanovic, Boyan & MacDonald, Glenn M, 1994.
Journal of Political Economy,
University of Chicago Press, vol. 102(1), pages 24-52, February.
- Jovanovic, Boyan & MacDonald, Glenn M., 1988. "Competitive Diffusion," Working Papers 88-29, C.V. Starr Center for Applied Economics, New York University.
- Jovanovic, B. & Macdonald, G.M., 1988. "Competitive Diffusion," RCER Working Papers 160, University of Rochester - Center for Economic Research (RCER).
- Boyan Jovanovic & Glenn MacDonald, 1993. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
- Jovanovic, B. & MacDonald, G.M., 1991. "Competitive Diffusion," Papers 92-08, Rochester, Business - Financial Research and Policy Studies.
- Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
- Bronwyn H. Hall, 1986.
"The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector,"
NBER Working Papers
1965, National Bureau of Economic Research, Inc.
- Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
- McPherson, Michael A., 1996. "Growth of micro and small enterprises in southern Africa," Journal of Development Economics, Elsevier, vol. 48(2), pages 253-277, March.
- Vijaya Ramachandran & Manju Kedia Shah, 1999. "Minority entrepreneurs and firm performance in sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 36(2), pages 71-87.
When requesting a correction, please mention this item's handle: RePEc:taf:jdevst:v:42:y:2006:i:5:p:812-836. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.