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Founding Conditions and the Survival of New Firms

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

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.

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File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/WP200301.pdf
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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200301.

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Date of creation: 2003
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Handle: RePEc:ptu:wpaper:w200301
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  1. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  2. 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.
  3. Pfeiffer, Friedhelm & Reize, Frank, 1998. "Business Start-ups by the Unemployed - an Econometric Analysis Based on Firm Data," ZEW Discussion Papers 98-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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