Firm performance and markets: survival analysis of medium and large manufacturing enterprises in Indonesia

Rifai Afin (), Keresztély Tibor () and Cserháti Ilona ()
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Rifai Afin: Corvinus University of Budapest
Keresztély Tibor: Corvinus University of Budapest
Cserháti Ilona: Corvinus University of Budapest

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2025, vol. 52, issue 1, No 5, 107-151

Abstract: Abstract This study identifies the effect of firm performance, especially efficiency, on firm survival. This study applies efficiency calculations using a translog model based on both time-invariant and time-varying production functions and the Ackerberg–Caves–Frazer (ACF) model to overcome the endogeneity problem in the estimation of the production function. The data used are firm-level data, which are medium and large manufacturing company censuses with an observation period from 1995 to 2015. This study used two estimation techniques: the Cox proportional hazard model and Poisson regression. I estimate the Cox regression with firm-level data, whereas the Poisson regression is estimated with aggregate data for 2-digit ISIC. Estimates at the aggregate 2-digit ISIC level are intended to not only see the effect of efficiency on companies that survive but also on companies that enter and exit. Firm-level evidence shows that a company’s efficiency reduces the hazard ratio or increases its survival time. Moreover, consistent with firm-level results, the aggregate-level estimation shows that efficiency increases the chances of survival and entry of companies into Indonesia and reduces the rate of company exit from the Indonesian market. This shows that a company's level of technical efficiency makes an important contribution to the survival of manufacturing companies in Indonesia.

Keywords: Firm survival; Efficiency; Market structure; Macroeconomic stability (search for similar items in EconPapers)
JEL-codes: L10 L22 L25 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40812-024-00302-7

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