Abstract
Abstract While several plots of the aggregate age distribution suggest that firm age is exponentially distributed, we find some departures from the exponential benchmark. At the lower tail, we find that very young establishments are more numerous than expected, but they face high exit hazards. At the upper tail, the oldest firms are older than the exponential would have predicted. Furthermore, the age distribution of disaggregated industries (such as the international airline industry) is less regular and can display multimodality. Although we focused on departures from the exponential, we found that the exponential was a useful reference point and endorse it as an appropriate benchmark for future work on industrial structure.
Highlights
A very large literature has focused on the firm size distribution (for recent surveys see de Wit (2005) and Coad (2009, Chapter 2))
We suggest that the age distribution is a useful summary representation of the structure of industries, that it displays a regular shape that is robust across datasets and is a close match to the exponential distribution
We began the paper by showing some age distribution plots at the aggregate level, observing that the exponential distribution appeared to be a useful approximation for the empirical distribution
Summary
A very large literature has focused on the firm size distribution (for recent surveys see de Wit (2005) and Coad (2009, Chapter 2)). We suggest that the age distribution is a useful summary representation of the structure of industries, that it displays a regular shape that is robust across datasets and is a close match to the exponential distribution. The existing literature on firm survival has often focused on tracking small samples of firms in specific industries (for example, Delacroix and Carroll (1983) on Argentinian and Irish newspapers, Barron et al (1994) on credit unions in New York City, Klepper (2002) on the automobile, tyre, television, and penicillin industries in the US, and Thompson (2005) on the iron and steel shipbuilding industry in the US) In this vein, some studies have provided evidence that there are distinct periods of high entry and high exit at specific stages in the life cycle of some industries and submarkets (see for example Klepper and Thompson (2006) on the US laser industry, Guenther (2009) on the German machine tools industry, and Buenstorf and Klepper (2009) on the US tyre industry).
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