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The Survival of Industrial Plants

Author

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  • Michael Gort
  • J. Bradford Jensen
  • Seong-Hoon Lee

Abstract

The study seeks to explain the attrition rate of new manufacturing plants in the United States in terms of three vectors of variables. The first explains how survival of the fittest proceeds through learning by firms (plants) about their own relative efficiency. The second explains how efficiency systematically changes over time and what augments or diminishes it. The third captures the opportunity cost of resources employed in a plant. The model is tested using maximum-likelihood probit analysis with very large samples for successive census years in the 1967-97 period. One sample consists of an unbalanced panel of about three-fourths of a million plants of single and multi-unit firms, or alternatively of about 300,000 plants if only the most reliable data are considered. The second is restricted to the plants of multi-unit firms in the same time span and consists of an unbalanced panel of more than 100,000 plants. The empirical analysis strongly confirms the predictions of the model.

Suggested Citation

  • Michael Gort & J. Bradford Jensen & Seong-Hoon Lee, 2002. "The Survival of Industrial Plants," Working Papers 02-25, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:02-25
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    File URL: https://www2.census.gov/ces/wp/2002/CES-WP-02-25.pdf
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    References listed on IDEAS

    as
    1. Wagner, Joachim, 1994. "The Post-entry Performance of New Small Firms in German Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 141-154, June.
    2. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    3. Rajshree Agarwal & Michael Gort, 2002. "Firm and Product Life Cycles and Firm Survival," American Economic Review, American Economic Association, vol. 92(2), pages 184-190, May.
    4. Timothy Dunne & Mark J. Roberts & Larry Samuelson, 1988. "Patterns of Firm Entry and Exit in U.S. Manufacturing Industries," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 495-515, Winter.
    5. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    6. Seong-Hoon Lee & Michael Gort, 2001. "The Life Cycles of Industrial Plants," Working Papers 01-10, Center for Economic Studies, U.S. Census Bureau.
    7. Evans, David S, 1987. "Tests of Alternative Theories of Firm Growth," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 657-674, August.
    8. 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.
    9. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    10. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 523-542, December.
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    Keywords

    CES; economic; research; micro; data; microdata; chief; economist;

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