Survival of Firms over the Product Life Cycle

Abstract

While entry and exit of firms have for long been recognized as two of the major determinants of market structure, empirical work on the subject has lagged behind for lack of adequate data. Of late, access to new data bases and the increasing use of Census of Manufactures data have enabled researchers to investigate the entry and exit of firms as well as their performance subsequent to entry. Dunne, Roberts and Samuelson use Census data for U.S. manufacturing industries [11; 12], while Baldwin and Gorecki do the same for Canadian manufacturing industries [7]. Some studies have used Small Business Administration data to track survival of firms over a ten year period [4; 5; 23; 25]. Survival of firms has also been studied as a side issue to growth of firms [16; 13]. While more is known now than ever before on survival of firms subsequent to their entry, most of the studies are cross sectional in nature and also consider entire industries rather than product markets where the actual entry and exit of firms occur. This study focuses on firm survival in product markets over the span of life of the product and considers the impact of firm attributes and the effect of evolution of markets on firm survival.