IDEAS home Printed from https://ideas.repec.org/p/lic/licosd/11402.html
   My bibliography  Save this paper

Firm Growth and Survival in a Transition Country: Micro Evidence from Slovenia

Author

Listed:
  • Jozef Konings
  • Ana Xavier

Abstract

This paper investigates the determinants of firm survival and growth in Slovenia, a country in transition from a plan to a market economy. Firm growth (measured using employment) and firm survival (the probability of remaining in activity) are estimated using firm level data for the years 1994 to 1998. Both the OLS and the Heckman selection correction models are used to estimate a basic model of firm growth adjusted to analyse the specific context of transition. The performance of Slovenian firms that survived from 1994 until 1998 is studied using firm and industry pre-transition conditions so as to understand what type of firms best survived and performed in the transition process. Firm performance is assumed to be a function of several factors including initial firm size, ownership, firm innovation, trade orientation, capital intensity, firm financial constraints, firm costs and profitability, sunk costs or minimum efficiency scale, and market structure. Evidence suggests that, in Slovenia, during the first four years of transition, private and foreign owned firms, whose activity involved foreign trade, and potentially more capital intensive, grew the fastest. Small firms grew more than medium firms did, and also did large firms. Large firms or those with initial positive profits were more likely to remain in activity whilst firms with ill financial health, high costs, or involved in foreign trade were more likely to close down. This suggests that firms that are trading internationally are exposed to more competitive pressure and therefore are more likely to fail, however, once they survive they will also have a superior growth performance. It may also indicate that firms in Slovenia face hard budget constraints.

Suggested Citation

  • Jozef Konings & Ana Xavier, 2002. "Firm Growth and Survival in a Transition Country: Micro Evidence from Slovenia," LICOS Discussion Papers 11402, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:11402
    as

    Download full text from publisher

    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp114.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Patrick P. Walsh & Alexander Repkine, 1998. "European Trade and Foreign Direct Investment U-Shaping Industrial Output in Central and Eastern Europe; Theory and Evidence," IMF Working Papers 98/150, International Monetary Fund.
    2. Dunne, Paul & Hughes, Alan, 1994. "Age, Size, Growth and Survival: UK Companies in the 1980s," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 115-140, June.
    3. Sorm, Vit & Terrell, Katherine, 2000. "Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 431-455, September.
    4. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    5. Nickell, Stephen & Nicolitsas, Daphne, 1999. "How does financial pressure affect firms?," European Economic Review, Elsevier, vol. 43(8), pages 1435-1456, August.
    6. J. David Brown & John S. Earle, 2000. "Competition and Firm Performance: Lessons from Russia," William Davidson Institute Working Papers Series 296, William Davidson Institute at the University of Michigan.
    7. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    8. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    9. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    10. 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.
    11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    12. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    13. M. Dewatripont & E. Maskin, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 541-555.
    14. Erik Mathijs & Marian Rizov, 2001. "Survival and Growth of Individual Farm Enterprises in Transition Economies: Empirical Evidence from Hungary," LICOS Discussion Papers 10101, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    15. David J. Teece, 2008. "Technology Transfer By Multinational Firms: The Resource Cost Of Transferring Technological Know-How," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 1, pages 1-22 World Scientific Publishing Co. Pte. Ltd..
    16. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, January.
    17. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    18. 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.
    19. 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.
    20. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    21. Gibson, John K & Harris, Richard I D, 1996. "Trade Liberalisation and Plant Exit in New Zealand Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 521-529, August.
    22. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact of Private Ownership on Corporate Performance in the Transition Economies," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1153-1191.
    23. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    24. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
    25. Alessandro Sembenelli & Davide Vannoni, 2000. "Why Do Established Firms Enter Some Industries and Exit Others? Empirical Evidence on Italian Business Groups," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 441-456, December.
    26. Konings, Jozef, 1997. "Firm growth and ownership in transition countries," Economics Letters, Elsevier, vol. 55(3), pages 413-418, September.
    27. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    28. Hart, Peter E & Oulton, Nicholas, 1996. "Growth and Size of Firms," Economic Journal, Royal Economic Society, vol. 106(438), pages 1242-1252, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, pages 69-98.
    2. John Hutchinson & Ana Xavier, 2006. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," Small Business Economics, Springer, pages 169-179.
    3. Jesús Cuaresma & Harald Oberhofer & Gallina Vincelette, 2014. "Institutional barriers and job creation in Central and Eastern Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-29, December.
    4. Maryanchyk Ivan, "undated". "Market Structure and Profitability in a Transition Economy: Ukrainian Case," EERC Working Paper Series 03-06e, EERC Research Network, Russia and CIS.
    5. Iwasaki, Ichiro, 2014. "Global financial crisis, corporate governance, and firm survival:," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 178-211.
    6. Doan, Quang Hung & Vu, Hoang Nam & Dao, Ngoc Tien, 2013. "Sub-National Institutions and Firm Survival in Vietnam," MPRA Paper 63653, University Library of Munich, Germany.
    7. John Hutchinson, 2003. "Is there a Lower Bound to the Firm Size Distribution Comparing Transition Economies with an Established Market Economy," LICOS Discussion Papers 13503, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    8. Vu, Van Huong, 2012. "Private manufacturing SMEs survival and growth in Vietnam: The role of export participation," MPRA Paper 42489, University Library of Munich, Germany.
    9. Dirk Czarnitzki & Kornelius Kraft, 2006. "R&D and Firm Performance in a Transition Economy," Kyklos, Wiley Blackwell, vol. 59(4), pages 481-496, November.
    10. Iwasaki, Ichiro, 2013. "Global Financial Crisis, Corporate Governance, and Firm Survival: The Russian Experience," RRC Working Paper Series 37, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    11. Huong Vu & Steven Lim, 2013. "Exports and Firm survival: The first evidence from Vietnam private manufacturing SMEs," Economics Bulletin, AccessEcon, vol. 33(2), pages 1259-1268.
    12. Valentina Hartarska & Claudio Gonzalez-Vega, 2006. "What Affects New and Established Firms’ Expansion? Evidence from Small Firms in Russia," Small Business Economics, Springer, vol. 27(2), pages 195-206, October.
    13. Katja Zajc Kejžar, 2011. "The role of foreign direct investment in the host-country firm selection process: firm-level evidence from Slovenian manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(1), pages 169-193, April.

    More about this item

    Keywords

    transition economies; Slovenia; manufacturing; firm growth and survival; firm ownership; firm trade orientation;

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lic:licosd:11402. 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: (). General contact details of provider: http://edirc.repec.org/data/licosbe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.