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Founding Conditions and the Survival of New Firms

Author

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  • P.A. Geroski
  • José Mata
  • Pedro Portugal

Abstract

This paper explores the effects that founding conditions have on the survival of new firms. A regression model which allows us to examine the role played by a number of different features of founding conditions on survival rates was estimated. The effect of founding conditions is estimated taking also into account that survival may be affected by current market conditions. Further, the model allows the effects of founding conditions to be transitory, and provides a way to assess how long such effects last. Using data on 118,114 Portuguese new firms observed over the period 1983 – 1993, we find that founding effects are important determinants of exit rates, and in some cases, they are more important that current conditions. In most cases, founding effects seem to persist without much of an attenuation in their effect on survival rates for at least several years after the founding of the firm.

Suggested Citation

  • P.A. Geroski & José Mata & Pedro Portugal, 2003. "Founding Conditions and the Survival of New Firms," Working Papers w200301, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w200301
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200301.pdf
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    References listed on IDEAS

    as
    1. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    2. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    3. Pfeiffer, Friedhelm & Reize, Frank, 2000. "Business start-ups by the unemployed -- an econometric analysis based on firm data," Labour Economics, Elsevier, vol. 7(5), pages 629-663, September.
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    More about this item

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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