Do Temporary Demand Shocks Have Long-Term Effects for Startups?

90 Pages Posted: 17 Aug 2019 Last revised: 17 Jun 2020

See all articles by Hans K. Hvide

Hans K. Hvide

University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Tom Meling

University of Bergen; University of Chicago

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Date Written: June 16, 2020

Abstract

Using detailed procurement auctions and register data, we find that temporary demand shocks have long-term effects on startup outcomes. Startups that win a procurement auction are more than 20% larger in terms of sales and employment than startups that narrowly lose an auction, even several years after the contract work ends. For mature firms, we do not find long-term effects of
auction wins. The persistent effects of temporary demand shocks for startups appear driven by learning-by-doing effects and by winning startups undertaking irreversible investments. The results point to the importance of path dependence in shaping the long-term outcomes of startups.

Keywords: entrepreneurship, path dependency, startups

JEL Classification: JEL D21, D24, J23, L11, L25, G39

Suggested Citation

Hvide, Hans and Meling, Tom, Do Temporary Demand Shocks Have Long-Term Effects for Startups? (June 16, 2020). Available at SSRN: https://ssrn.com/abstract=3437270 or http://dx.doi.org/10.2139/ssrn.3437270

Hans Hvide

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

HOME PAGE: http://hans.hvide.googlepages.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tom Meling (Contact Author)

University of Bergen ( email )

Fosswinckelsgt. 6
Bergen, N-5007
Norway

HOME PAGE: http://https://sites.google.com/site/tomgrmeling/

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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