Growth Paths and Exit Routes: 'Shadow of Death' Effects for New Firms in Japan

The Institute of Economics will hold a meeting of its Seminar Series on Tuesday, March 6, 2018: Alex Coad from Pontifical Catholic University of Peru will give a seminar on "Growth Paths and Exit Routes: 'Shadow of Death' Effects for New Firms in Japan".

Abstract:

Research has recently emphasized that the non-survival of entrepreneurs can be disaggregated into distinct exit routes such as acquisition, voluntary closure and failure. Firm performance is an alleged determinant of exit route. However, there is a lack of evidence linking exit routes to their previous growth performance. We contribute to this gap by analysing a cohort of incorporated firms in Japan, and find some puzzles for the standard view. In the Japanese context, not all exit routes are available to all firms: small firms do not realistically face the options of acquisition or bankruptcy, but essentially face a choice between survival and voluntary liquidation. High-growth firms are more likely than no-growth firms to exit by bankruptcy or voluntary liquidation. The probability of merger seems unrelated to prior sales growth.