The dynamic adjustment process of firm entry and exit in manufacturing and finance, insurance, and real estate

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34 Scopus citations

Abstract

This article examines the dynamic adjustment process of firm entry and exit in manufacturing and finance, insurance, and real estate (FIRE). The object is to extend our knowledge of firm dynamics to include firm exit as well as nonmanufacturing firms. This interindustry comparison of firm dynamics uses a unique longitudinal firm-level data set containing over 13,000 firms. I report three main findings. First, in both industries firm entry is characterized by a decline in the first two moments of the growth rate distribution and by a rise in the first two moments of the relative firm size distribution as firms age. Second, in both industries firm exit is characterized by falling mean growth rates and mean relative firm size for a number of periods prior to exit. Third, relative to FIRE, firm entry and exit in manufacturing is a longer process and involves larger adjustments in relative firm size.

Original languageEnglish
Pages (from-to)705-735
Number of pages31
JournalJournal of Law and Economics
Volume39
Issue number2
DOIs
StatePublished - 1996

ASJC Scopus subject areas

  • Economics and Econometrics
  • Law

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