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Turbulence in High Growth and Declining Industries

  • Rui Baptista

    ()

    (IN+, Instituto Superior Tecnico, Technical University of Lisbon; Max Planck Institute of Economics)

  • Murat Karaoez

    (IN+, Instituto Superior Tecnico, Technical University of Lisbon; IIBF, Department of Economics, Sueleyman Demirel University, Isparta, Turkey)

We examine turbulence over the product life cycle using the lowest possible level of industry aggregation, allowing for the use of panel data to study the evolution of single product markets. We find that replacement of exiting firms by subsequent entry plays a primary role in generating turbulence in high growth markets, while displacement of incumbents by recent entrants is the main selection force in declining markets. As product life cycles progress, trial-and-error entry subsides, and turbulence decreases.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-043.

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Date of creation: 31 Jul 2007
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Handle: RePEc:jrp:jrpwrp:2007-043
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  1. Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc.
  2. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
  3. Nickell, S.J., 1993. "Competition and Crporate Performance," Economics Series Working Papers 99155, University of Oxford, Department of Economics.
  4. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
  5. Levy, David, 1985. "Specifying the Dynamics of Industry Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 34(1), pages 55-68, September.
  6. Vivarelli, Marco & Audretsch, David, 1998. "The Link between the Entry Decision and Post-Entry Performance: Evidence from Italy," Industrial and Corporate Change, Oxford University Press, vol. 7(3), pages 485-500, September.
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