How Problems of Organisational Growth in Firms Affect Industry Entry and Exit

Abstract

Many newly emerging industries show similar patterns of development regarding entry and exit dynamics. This paper argues that several features of exit and new entry into industries through diversification and spinoff formation can be related to problems arising within firms when their organizations grow during the industry’s life cycle. Drawing on earlier work, the growth-induced learning and coordination problems of the firms are outlined and their impact at the industry level is discussed.JEL Classification: L25, L59, O31.