Ownership of Industry and Plant Stability in Israel's Development Towns

Abstract

The ownership structure of industry in Israel's development towns during the period 1966-83 is examined, as well as its effects on the stability of the plants. Multi-variate logit models, used to identify the factors affecting closure propensity, show that the most stable plants are owned by the rural-cooperative sector. Due mostly to their large size, the plants of non-local multi-plant firms are relatively stable, as are also those of local entrepreneurs in their first years of existence, but the latter show no tendency to survive for long. The plants, particularly young ones, owned by external single-plant firms, exhibit the highest closure propensity. Closure rates of plants of the diverse ownership types are good indicators of their stability but not of structural changes in the economy as depicted in the relative share of the various ownership types. While external ownership appears to have a negative impact on stability, the size of a firm influences positively its plants' stability. These contradictory effects result in the high closure propensity of plants owned by external single-plant firms.