Life Duration of New Firms

Abstract

The authors follow firms created in Portuguese manufacturing in 1983 and study the determinants of their lifetime. One fifth of them died during the first year of their lives and only 50 percent survived for four years. Duration and limited-dependent variable models are employed to ascertain the relative importance of industry- and firm-specific variables to in explaining the period between firm birth and its disappearance from economic activity. New firm failure varies negatively with firm start-up size, the number of plants operated by the firm, and the industry growth rate, and positively with the extent of entry in the industry. Copyright 1994 by Blackwell Publishing Ltd.