Entrant Experience and Plant Exit / Timothy Dunne, Shawn D. Klimek, Mark J. Roberts.

Format:

Book

Author/Creator:

Dunne, Timothy.

Contributor:

National Bureau of Economic Research.

Klimek, Shawn D.

Roberts, Mark J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10133.

NBER working paper series no. w10133

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Producers entering a market can differ widely in their prior production experience, ranging from none to extensive experience in related geographic or product markets. In this paper, we quantify the nature of prior plant and firm experience for entrants into a market and measure its effect on the plant's decision to exit the market. Using plant-level data for seven regional manufacturing industries in the U.S., we find that a producer's experience at the time it enters a market plays an important role in the subsequent exit decision, affecting both the overall probability of exit and the method of exit. After controlling for observable plant and market profit determinants, there remain systematic differences in failure patterns across three groups of plants distinguished by their prior experience: de novo entrants, experienced plants that enter by diversifying their product mix, and new plants owned by experienced firms. The results indicate that the exit decision cannot be treated as determined solely by current and future plant, firm, and market conditions, but that the plant's history plays an important independent role in conditioning the likelihood of survival.

Notes:

Print version record

December 2003.