An Integrative Model of Firms’ Entry Decisions

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2007, vol. 53, issue 1, pages 45-69

Abstract: The paper presents a tractable empirical entry model that integrates strategic considerations and firms’ heterogeneity. Individual entry decisions are derived from a profit function and are specified as the outcome of a discrete game among potential entrants. Using data from a set of Portuguese manufacturing industries over a 6-years period, the estimation of the reduced form of the entry model is based on panel count data models, rendering a novel departure from previous works. The results suggest that both incumbents’ behaviour towards entry and firm-specific characteristics provide additional and interesting insights in understanding entry. Specifically, entrants choose the structure of their labour force as an important firm-specific resource. We also find that industry structure matters greatly.

Keywords: entry; firms’ heterogeneity; manufacturing; panel count data models (search for similar items in EconPapers)
JEL-codes: C23 C25 L10 L60 (search for similar items in EconPapers)

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Applied Economics Quarterly (formerly: Konjunkturpolitik) is edited by Christian Wey and Klaus F. Zimmermann

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