Industry Dynamics and Productivity Research

Firms experience birth (entry), growth and death (exit) as all living things do in any biological system. However, not all firms will show the same rate of growth and the same hazard rate of exit. Industry dynamics is a field of research that analyzes the dynamic patterns of entry, growth and exit of firms, and investigates the sources of those changes.On the other hand, productivity research has focused on the performance measurement of individual economic entities?such as firm, industry and country?and also on the examination of the sources. This paper reviews the past contribution of productivity research on industry dynamics and tries to specify the important future research areas that connect the two fields of research. For the past contribution, the paper emphasizes the following three issues: productivity as a measure of heterogeneity of firm population; productivity as an important source of the event in industry dynamics; source decomposition of industry-level productivity change. For the future work, the paper suggests the three areas of research: theoretical modeling that associates productivity with industry dynamics; accommodation of recent methodological developments of productivity analysis; rigorous study on the causal relationships among factors that affect the productivity change and industry dynamics. It is expected to better understand the logic behind pervasive yet complex behaviors of firms and industries, if the two research areas?productivity analysis and industry dynamics?interact more intensively