Life Duration of New Firms and Its Determinants Evidence from Food and Beverages Manufacturing Firms during the Second, Third and Fourth Development Plan in Iran

Document Type : Research Paper

Authors

Department of Industrial Economics, Business School, Yazd University, Yazd, Iran

Abstract

In the economic literature, firm entry and exit are considered as two basic concepts and the time interval between them, known as life duration, is almost a neglected subject in Iranian economy. Accordingly, this study tries to investigate the life duration of new firms in food and beverage industry as one of the most manufacturing industries in Iran during 1996-2005. Factors affecting the life duration have been divided into four categories namely, firms, as well as industry, personal and expenditure characteristics. Furthermore, the Cox proportional hazard model is used as the econometric model. The results show that the life duration of new firms in this industry are affected by eight variables: firm size at the time of entry, profitability, capital intensity, industry concentration rate, optimal size of industry, advertising expenditure, investment and labor force gender composition. In terms of policy implication, firm size as the most affective factor on life duration shoul be considered in all of new firm formation programe.
JEL Classification: L26, L25, L1

Keywords


Volume 48, Issue 2 - Serial Number 2
August 2013
Pages 151-178
  • Receive Date: 13 June 2012
  • Revise Date: 17 September 2013
  • Accept Date: 23 April 2013
  • First Publish Date: 23 July 2013