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The measurement and analysis of firm entry and exit in the United States manufacturing sector, 1963-1982

Author
Dunne, Timothy
Physical Description
186 pages
Additional Creators
Pennsylvania State University
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Summary
Firm entry and exit are important determinants of market performance. A vast theoretical literature has examined the implications of actual entry, potential entry, and strategically deterred entry. An equally large empirical literature has examined correlations between variables measuring market performance and factors which can hinder the entry of new competitors. In spite of this interest in the potential implications of entry and exit, surprisingly little is known about the actual patterns of firm entry and exit in the U.S. economy.
This research provides new evidence on the entry and exit of firms in the U.S. manufacturing sector for the period 1963-1982. The measures of entry and exit used in this study are constructed from a newly-developed data set based on the individual plant-level data collected in the last five Censuses of Manufactures. This data set allows for the identification of the entry of new firms, the growth or decline of existing firms, and the exit of failing firms.
Using this data, industry-level statistics on entry and exit rates, market shares, and average sizes are constructed. The entry variables are disaggregated by the method of entry and type of entrant, and the exit variables are disaggregated by the age of the exiting firms. The entry process is found to be dominated by a large number of very small new firms while the exit process is characterized by a large number of young firms exiting industries.
In addition, an empirical model of market selection is developed and tested that examines the effect that firm size, firm age, and firm production structure have on the exit rate of firms. The results of this research indicate that as firm age increases the probability of firm failure declines. The relationship found between firm size and the probability of firm failure is weakly negative. Finally, if a firm is a multi-plant producer, it is less likely to fail than a single-plant producer. Thus, in general, the market selection model captures several important facets of the process of firm exit.
Other Subject(s)
Dissertation Note
Ph.D. The Pennsylvania State University 1987.
Note
Source: Dissertation Abstracts International, Volume: 49-04, Section: A, page: 8880.
Adviser: Mark J. Roberts.
Part Of
Dissertation Abstracts International
49-04A
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