The Survival of New Plants : Start-Up Conditions and Post-Entry Evolution

Studies the longevity of startups and the determinants of survival for new manufacturing plants, using econometric duration models to analyze the timing of plant exits. A database of 17,000 Portuguese manufacturing plants opened in the 1980s is used to determine effect of plant size on the likelihood of exit (through 1990). The regression results indicate that current (rather than initial) plant size correlates with the chances of survival. Since larger organizations tend to be more efficient, they are less likely to exit. In addition, plants that have started smaller but experienced faster post-entry growth have a greater probability of survival. Patterns of survival differ by type of entrant -- e.g., whether a plant is established in the same industry as its parent. Results also show that, in industries characterized by high entry rates where new firms face more competition from other startups, post-entry survival is more difficult. However, in fast growing industries where market entry can be achieved without causing harm to competitors, plants tend to survive longer. (SFL)