Industrial dynamics throughout the ICT innovation cycle: The rise and decline of business dynamism in Portugal during 1986-2018

Ernesto Nieto-Carrillo, Carlos Carreira () and Paulino Teixeira
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Ernesto Nieto-Carrillo: University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics
Authors registered in the RePEc Author Service: Ernesto Nieto Carrillo

No 2023-03, CeBER Working Papers from Centre for Business and Economics Research (CeBER), University of Coimbra

Abstract: Increasing evidence shows that business dynamism has weakened in most developed economies. However, except for the US literature, most previous research has only portrayed the new century’s changes in firm dynamics. Instead, we focus on a longer period, 1986-2018, assembling an extensive longitudinal database with a time-consistent industry classification covering the population of Portuguese firmsin the manufacturing and service sectors. The BaiPerron estimate for unknown break dates in time series indicates two structural changes in industrial dynamics, one in its ascending wave (1993) and another in the declining phase (2003). Accordingly, our (HP) estimated trends show that, after an initial period of intense creative destruction, firm dynamics have become less turbulent since 2003, with lower entry, declined job reallocation, and decreased growth rates. Furthermore, survival and counterfactual firm-level regressions suggest that an otherwise-equal post-2003 start-up faced a significantly higher exit hazard than its pre-1993 counterpart (i.e., without any structural change). As a result, new and young companies have seen their share in aggregate employment and net job creation decline, notwithstanding the increasingly higher performance of young, high-growth firms. Lower labour and firm turnover suggest a weakened contribution of reallocation to productivity growth. On the other hand, decreased entry and the higher exit hazard have likely undermined the disruptive potential of transformative entrepreneurship.

Keywords: Firm dynamics; Entry; High-growth firms; Resource reallocation; Survival. (search for similar items in EconPapers)
Pages: 40 pages
Date: 2023-04
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-ent, nep-ict, nep-ind, nep-ino, nep-sbm and nep-tid
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