Entrant Experience and Plant Exit

41 Pages Posted: 22 Aug 2007 Last revised: 10 Sep 2010

See all articles by Timothy Dunne

Timothy Dunne

Federal Reserve Bank of Cleveland

Shawn D. Klimek

U.S. Census Bureau - Center for Economic Studies

Mark J. Roberts

Pennsylvania State University - College of the Liberal Arts - Department of Economics; National Bureau of Economic Research (NBER)

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

Dunne, Timothy and Klimek, Shawn D. and Roberts, Mark J., Entrant Experience and Plant Exit (December 2003). NBER Working Paper No. w10133. Available at SSRN: https://ssrn.com/abstract=476090

Timothy Dunne

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

Shawn D. Klimek

U.S. Census Bureau - Center for Economic Studies ( email )

4600 Silver Hill Road
Washington, DC 20233
United States
(301) 763-2861 (Phone)
(301 763-5935 (Fax)

HOME PAGE: http://www.ces.census.gov

Mark J. Roberts (Contact Author)

Pennsylvania State University - College of the Liberal Arts - Department of Economics ( email )

513 Kern Graduate Building
University Park, PA 16802-3306
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
29
Abstract Views
830
PlumX Metrics