Entrant Experience and Plant Exit
41 Pages Posted: 22 Aug 2007 Last revised: 10 Sep 2022
Date Written: December 2003
Abstract
Producers entering a market can differ widely in their prior production experience, ranging from none to extensive experience in related geographic or product markets. In this paper, we quantify the nature of prior plant and firm experience for entrants into a market and measure its effect on the plant's decision to exit the market. Using plant-level data for seven regional manufacturing industries in the U.S., we find that a producer's experience at the time it enters a market plays an important role in the subsequent exit decision, affecting both the overall probability of exit and the method of exit. After controlling for observable plant and market profit determinants, there remain systematic differences in failure patterns across three groups of plants distinguished by their prior experience: de novo entrants, experienced plants that enter by diversifying their product mix, and new plants owned by experienced firms. The results indicate that the exit decision cannot be treated as determined solely by current and future plant, firm, and market conditions, but that the plant's history plays an important independent role in conditioning the likelihood of survival.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Multi-Product Firms and Product Switching
By Andrew B. Bernard, Stephen J. Redding, ...
-
Multi-Product Firms and Product Switching
By Andrew B. Bernard, Stephen J. Redding, ...
-
Multi-Product Firms and Product Switching
By Stephen J. Redding, Andrew B. Bernard, ...
-
Multi-Product Firms and Product Switching
By Andrew B. Bernard, Stephen J. Redding, ...
-
Multi-Product Firms and Trade Liberalization
By Andrew B. Bernard, Stephen J. Redding, ...
-
Multi-Product Firms and Trade Liberalization
By Andrew B. Bernard, Stephen J. Redding, ...
-
Multi-Product Firms and Trade Liberalization
By Andrew B. Bernard, Stephen J. Redding, ...
-
Comparative Advantage and Heterogeneous Firms
By Andrew B. Bernard, Stephen J. Redding, ...
-
Comparative Advantage and Heterogeneous Firms
By Andrew B. Bernard, Stephen J. Redding, ...
-
Comparative Advantage and Heterogenous Firms
By Andrew B. Bernard, Stephen J. Redding, ...