Firm lifecycles and evolution of industry productivity

Ari Hyytinen*, Mika Maliranta

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

13 Citations (Scopus)

Abstract

How do new firms contribute to industry productivity growth at the time of entry and then subsequently over their lifecycle? We analyze this question using a lifecycle decomposition approach and Finnish business-level microdata. New entrants have a negative effect on industry productivity growth initially, but a prolonged process of market selection and exit during the early stages of the firms' lifecycle mitigates this negative effect subsequently. The positive productivity contribution of market selection declines gradually, both because the failure rate decreases with age and also because the productivity gap between the exiting and surviving firms narrows. The most important source of industry productivity growth is, however, the average productivity growth of relatively old incumbents, i.e. their incremental renewal. Our lifecycle approach also provides novel viewpoints for policy.

Original languageEnglish
Peer-reviewed scientific journalResearch Policy
Volume42
Issue number5
Pages (from-to)1080-1098
Number of pages19
ISSN0048-7333
DOIs
Publication statusPublished - 05.03.2013
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics
  • Productivity
  • Decomposition
  • Lifecycle
  • Entry
  • Exit
  • Experimentation

Fingerprint Dive into the research topics of 'Firm lifecycles and evolution of industry productivity'. Together they form a unique fingerprint.

  • Cite this