Interdependencies in the Dynamics of Firm Entry and Exit
2005 (English)Report (Other academic)
This paper investigates the dynamics of firm entry and exit with a focus on differences betweenindustrial sectors. The paper discusses how entry and exit rates in industrial sectors are affectedby previous exit and entry rates. Economic theory presents two different approaches to how entryand exit of firms are interrelated to each other, the multiplier effect and the competition effect.This paper intends to investigate which force that is the predominant one. The empirical analysisis based on data for 25 Swedish manufacturing industries at the 2-digit SIC-level, for firms withmore than five employees during the period 1991-2000. A dynamic panel data approach assuggested by Anderson and Hsio (1981) and Arellano and Bond (1991) are used in estimating therelationships. The empirical results find some evidence of the multiplier effect being thepredominant effect explaining entry while competition effects are more important for explainingexit patterns.
Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2005. , 30 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 28
Entry, exit, dynamic panel data
IdentifiersURN: urn:nbn:se:kth:diva-72352OAI: oai:DiVA.org:kth-72352DiVA: diva2:487515
QC 201202082012-02-082012-01-312012-02-08Bibliographically approved