Entry and exit in transition economies: the Slovenian manufacturing sector

This article investigates entry and exit in Slovenian manufacturing for the period 1994-2000 using OLS and panel data fixed and random-effects estimations. Private ownership is associated with higher rates of firm exit, suggesting that this ownership structure is related to a higher risk of bankruptcy so that the least efficient firms are replaced by more efficient ones. However, and although most entrants are private, it is negatively related to entry (in lagged terms), potentially indicating that sectors with a higher proportion of private firms are also highly populated, closer to break-even point and thus less appealing. Export orientation is associated with lower exit, confirming the theory that exporting firms outperformed domestically focused firms, and with lower entry, perhaps suggesting that exporting involves more complex ways of doing business that deter the typically small new entrants. Higher profitability reduces exit rates. Labour-intensive sectors witness higher entry rates, indicating that labour is relatively cheaper than capital for new entering firms. Finally, there may be important technological barriers to exit (sunk costs) in Slovenia, but not to entry.