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Interdependencies in the dynamics of firm entry and exit
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.). (Economics)ORCID iD: 0000-0002-1692-8677
2007 (English)In: Journal of Industry, Competition and Trade, ISSN 1566-1679, E-ISSN 1573-7012, Vol. 7, no 2, 113-130 p.Article in journal (Refereed) Published
Abstract [en]

This paper investigates the interdependence between firm entry and exit from an industrial dynamics perspective. The paper discusses how entry and exit rates in industrial sectors are affected by previous exit and entry rates. Economic theory presents two different approaches to how entry and exit of firms are interrelated, the multiplier effect and the competition effect. This paper intends to investigate which force is the predominant one, for entry and exit patterns, respectively. The empirical analysis is based on data for 25 Swedish manufacturing industries at the 2-digit SIC level, during the period 1991-2000. In the estimation work the study applies a dynamic panel data approach as suggested by Anderson and Hsiao [Journal of the American Statistical Association, 76:59-606, 1981] and Arellano and Bond [Review of Economic Studies, 58(2):277-297, 1991]. With respect to entry, the empirical results support the multiplier effect such that entry stimulates future entry, but also a competition effect such that past exit induces additional entry. With regard to exit, on the other hand, the competition effect rules, implying that previous entry causes subsequent exit and previous exit reduces subsequent exit.

Place, publisher, year, edition, pages
2007. Vol. 7, no 2, 113-130 p.
Keyword [en]
Dynamic panel data, Entry, Exit
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-62522DOI: 10.1007/s10842-006-0027-xScopus ID: 2-s2.0-34247152633OAI: oai:DiVA.org:kth-62522DiVA: diva2:480528
Note

QC 20120124

Available from: 2012-01-19 Created: 2012-01-19 Last updated: 2017-12-08Bibliographically approved

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Nyström, Kristina

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