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Productivity and Market Selection of French Manufacturing Firms in the Nineties

  • Lionel Nesta

    (OFCE)

  • Flora Bellone

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Patrick Musso

    (Groupe de Recherche en Droit, Economie et Gestion)

  • Michel Quéré

    (Groupe de Recherche en Droit, Economie et Gestion)

This paper analyses post-entry and pre-exit performance of French firms using a dataset covering 14 manufacturing industries over the period 1990-2002. The main focus is on market selection mechanisms looking at total factor productivity levels of entrants and exitors relative to incumbent firms. Entrants are found to outperform incumbents, while exitors are less efficient than their surviving counterparts. We nonetheless found key distinguishable features of exit patterns between young and mature firms. Young exiting firms do not display productivity disadvantage relative to incumbent firms. By contrast, mature exiting firms display large and persistent productivity disadvantage relative to their surviving counterparts (shadow of death effect). The determinants of exit differ for entrants and incumbents. Productive inefficiency is a key determinant of the exit of mature firms but not entrants.

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Paper provided by Sciences Po in its series Sciences Po publications with number 2006-04.

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Date of creation: Feb 2006
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Handle: RePEc:spo:wpmain:info:hdl:2441/7186
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