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Turbulence in High Growth and Declining Industries

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Rui Baptista & Murat Karaoez, 2007. "Turbulence in High Growth and Declining Industries," Jena Economic Research Papers 2007-043, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2007-043
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    References listed on IDEAS

    as
    1. Levy, David, 1985. "Specifying the Dynamics of Industry Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 34(1), pages 55-68, September.
    2. Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc.
    3. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    4. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    5. Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
    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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. André van Stel & Andrew Burke, 2008. "The Entrepreneurial Adjustment Process in Disequilibrium," Scales Research Reports H200809, EIM Business and Policy Research.
    2. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    3. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute for the Study of Labor (IZA).
    4. Rui Baptista & Murat Karaoez & Joana Mendonca, 2007. "Entrepreneurial Backgrounds, Human Capital and Start-up Success," Jena Economic Research Papers 2007-045, Friedrich-Schiller-University Jena.
    5. Jarmila Šebestová & Kateřina Nowáková, 2013. "Dynamic strategy for sustainable business development: mania or hazard?," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 15(34), pages 442-454, June.

    More about this item

    Keywords

    Entry; Exit; Selection; Product life cycle; Replacement; Displacement;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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