A Flexible Approach to Age Dependence in Organizational Mortality: Comparing the Life Duration for Cooperative and Non-Cooperative Enterprises Using a Bayesian Generalized Additive Discrete Time Survival Model

Damien Rousselière

doi:10.1007/s40953-019-00164-0

Abstract

This paper proposes a new estimation model to capture the complex effect of age on organization survival. Testing various theoretical propositions on organizational mortality, we study the survival of French agricultural cooperatives in comparison with other firms with which they compete. The relationship between age and mortality in organizations is analyzed using a Bayesian Generalized discrete-time semi-parametric hazard model incorporating unobserved heterogeneity, isolating the various effects of time and identifying within-effects and between-effects of the time-varying covariates. This analysis emphasizes the specificity of the temporal dynamics of cooperatives in relation to their special role in agriculture.

Highlights

Since the distance between the initial and the current environment increases with the age of the organization (Barron et al, 1994), the mortality rate should increase with each successive time period
Hannan et al (2007) propose an integration of these different effects to emphasize a positive impact of age on mortality in organizational ecology, and a negative effect, followed by a positive effect, in industrial organization
This suggests that the impact of age on mortality can not be summarize in our case by polynomial representations, but requires a more flexible approach

Summary

Introduction

The survival of firms is a major subject of study in economics, industrial organization or organizational ecology, with a large number of works, using various approaches, addressing this issue (Geroski, 1995; Geroski et al, 2010; Hannan, 1998, 2005; Jovanovic, 1982, 2001; Martimort, 1999; Mata and Portugal, 1994; Simons and Ingram, 2004). The notion of structural inertia is used to explain this effect: founders leave their mark on the organization This makes its transformation costly and increases mortality (Hannan et al, 2006). Hannan et al (2007) propose an integration of these different effects to emphasize a positive impact of age on mortality in organizational ecology (domination of P3 and P4 over P1 and P2), and a negative effect, followed by a positive effect, in industrial organization (domination of P1 and P4 over P2 and P3). Provides a review of the existing literature, emphasizing the specificity of cooperatives with respect to four potentially different effects of time on mortality.

Earlier works on the impact of time on the survival of cooperatives

Presentation of the data

Results

Discussion and conclusion

Convergence diagnostics

Hazard ratios