Entrant Experience and Plant Exit
Producers entering a market can differ widely in their prior production experience, ranging from none to extensive experience in related geographic or product markets. In this paper, we quantify the nature of prior plant and firm experience for entrants into a market and measure its effect on the plant’s decision to exit the market. Using plant-level data for seven regional manufacturing industries in the U.S., we find that a producer’s experience at the time it enters a market plays an important role in the subsequent exit decision, affecting both the overall probability of exit and the method of exit. After controlling for observable plant and market profit determinants, there remain systematic differences in failure patterns across three groups of plants distinguished by their prior experience: de novo entrants, experienced plants that enter by diversifying their product mix, and new plants owned by experienced firms. The results indicate that the exit decision cannot be treated as determined solely by current and future plant, firm, and market conditions, but that the plant’s history plays an important independent role in conditioning the likelihood of survival.
|Date of creation:||Aug 2004|
|Date of revision:|
|Publication status:||Published in International Journal of Industrial Organization|
|Contact details of provider:|| Postal: |
Phone: (301) 763-6460
Fax: (301) 763-5935
Web page: http://www.census.gov/ces
More information through EDIRC
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.:
- Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2003.
"Product Choice and Product Switching,"
CEP Discussion Papers
dp0594, Centre for Economic Performance, LSE.
- Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2003. "Product choice and product switching," LSE Research Online Documents on Economics 3672, London School of Economics and Political Science, LSE Library.
- Stephen Redding & Andrew Bernard & Peter Schott, 2005. "Product Choice and Product Switching," Working Papers 05-22, Center for Economic Studies, U.S. Census Bureau.
- Bernard, Andrew B. & Redding, Stephen J. & Schott, Peter K., 2003. "Product Choice and Product Switching," CEPR Discussion Papers 3959, C.E.P.R. Discussion Papers.
- Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2003. "Product Choice and Product Switching," Yale School of Management Working Papers ysm381, Yale School of Management.
- Andrew B. Bernard & Peter K. Schott & Stephen Redding, 2003. "Product Choice and Product Switching," NBER Working Papers 9789, National Bureau of Economic Research, Inc.
- Deily, Mary E, 1988. "Investment Activity and the Exit Decision," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 595-602, November.
- Baden-Fuller, Charles W F, 1989. "Exit from Declining Industries and the Case of Steel Castings," Economic Journal, Royal Economic Society, vol. 99(398), pages 949-61, December.
- Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995.
"The Survival of New Plants: Start-up Conditions and Post-entry Evolution,"
CEPR Discussion Papers
1203, C.E.P.R. Discussion Papers.
- 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.
- Steven Klepper, 2002. "Firm Survival and the Evolution of Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 37-61, Spring.
- J. Bradford Jensen & Andrew B Bernard, 2002.
"The Deaths of Manufacturing Plants,"
02-15, Center for Economic Studies, U.S. Census Bureau.
- 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.
- Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "The Growth and Failure of U.S. Manufacturing Plants," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 671-98, November.
- Evans, David S, 1987.
"The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 35(4), pages 567-81, June.
- Evans, David S., 1986. "The Relationship Between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Working Papers 86-33, C.V. Starr Center for Applied Economics, New York University.
- Das, Sanghamitra, 1992. "A Micro-econometric Model of Capital Utilization and Retirement: The Case of the U.S. Cement Industry," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 277-97, April.
- David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, June.
- 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.
- Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers 1-88-2, Pennsylvania State - Department of Economics.
- Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
- Michael D. Whinston, 1988. "Exit with Multiplant Firms," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 568-588, Winter.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:04-12. 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: (Fariha Kamal)
If references are entirely missing, you can add them using this form.