Survival of Firms and Plants in a Supply-Constrained Industry
Posted: 23 May 2008
Date Written: 24 November 2006
We analyze duration of firms in a supply-constrained industry - the Australian blackcoal industry - using our thirty-two-year database. We test the hypothesis that the exhaustion of coal reserves of individual mines (their plants) will be reflected in the firm's duration, and find negative duration dependence with the age of the firm. In contrast to the results from studies of manufacturing industries, we find no relationship between firm size and survival. For individual mines (plants) we find no dependence with age but positive dependence with size - the larger the mine, the longer it survives. We find that the exit of firms is driven by the depletion of their reserves, and by the entry of new firms seeking the supply-constrained resource.
Keywords: duration, Cox regression, firm, plant, size, survival, supply-constraint, coal.
JEL Classification: C41, L71
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