Industrial Organization and New Findings on the Turnover and Mobility of Firms

Richard E. Caves

Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research

Abstract: This paper surveys a large new literature derived from longitudinal data bases on the populations of firms and establishmnets in a number of countries. It shows the prevasiveness of turnover from entry and exit (high infant mortality of entrants); the entry process shows a good deal of rationality about entrants' chances and the importance of real options for entrants. Mobility and mean-regression processes are pervasive among incumbent firms. This evidence is related to the existing core of industrial organization, derived from equilibrium models, with emphasis on the integration of random processes and purposive behavior. Turnover and mobility are also related to productivity growth and the prevalence of productive inefficiency.

Date: 1997
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