Entrant Experience and Plant Exit

Mark Roberts, Shawn Klimek () and Timothy Dunne

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: 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.

JEL-codes: L0 L1 L6 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2004-08
New Economics Papers: this item is included in nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in International Journal of Industrial Organization

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https://www2.census.gov/ces/wp/2004/CES-WP-04-12.pdf First version, 2004 (application/pdf)

Related works:
Working Paper: Entrant Experience and Plant Exit (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:04-12

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