Size and technology: The Odd Couple for affiliates survival

Abstract

Firms’ survival and internationalization modes are key elements to assess a country's competitiveness. We draw on this to study how firms’ characteristics affect business demographic dynamics. We focus on affiliates survival probability, modeling it conditional on both parent company’ and affiliates’ set of characteristics. We generalize the base model used in business demography, disentangling and stressing the effects of both size and technological relationships between affiliates and investors. We show that, larger affiliates of large investors compete better and survive longer. Being part of a network of affiliates in the same country and/or sector improves firm survival probability. When investors have a higher (lower) technological level than their affiliates, the affiliates’ failure probability increases (decreases). An investor more technologically advanced than its affiliates, it is likely to consider them a cost-saving investment. While affiliates with a higher level of technology than their parent may be considered strategic.