Abstract
Over the past decades, exit has been analyzed at the theoretical and empirical levels. From this rich series of contributions, two basic patterns of exit can be identified: the revolving door and the gale of creative destruction. In the first, the liability of newness plays a major role in the exit process, while in the second the displacement of non-innovators is the driver of exit. We have tested these two patterns of exit on the population of Dutch firms that exited in 2018. We find confirmation that the two patterns characterize different types of industries. In industries in which innovation does not play a major role, the revolving door effect is the typical pattern and exit is concentrated among the adolescent firms. These firms are also small in size. On the contrary, in industries in which innovation plays a role, exit takes place both among infant as well as mature firms. Exiters are not necessarily only the smaller firms. While a highly innovative and uncertain environment can threaten the survival of infant firms, the exit of mature firms is driven by the innovation of young firms, following the gale of creative destruction.
Highlights
The exit of firms represents a key dimension of industrial dynamics
The liability of newness plays a major role in the exit process, while in the second the displacement of noninnovators is the driver of exit
While a highly innovative and uncertain environment can threaten the survival of infant firms, the exit of mature firms is driven by the innovation of young firms, following the gale of creative destruction
Summary
Exit has been analyzed in various ways: at the theoretical level by evolutionary models and by more traditional contributions, and at the empirical level by qualitative cases of individual firms or industries, by quantitative longitudinal analyses and by cross-industry studies From this rich series of contributions, it has emerged as “stylized facts” that entry and exit rates are common and are highly correlated across industrial sectors (Caves 1998; Dunne et al 1988; Geroski 1995). One pattern emphasizes that entry and exit are correlated This is the so called “revolving door” metaphor (Audretsch 1995; Dunne et al 1988) in which the “liability of newness” leads new firms to have a high probability of exit after a short period of activity. This exit pattern is more likely to occur in industries in which technological and demand conditions favor the entry of innovative firms (Manjón-Antolín 2010) simultaneously to the displacement of less innovative incumbents, in a so called “entrepreneurial regime” as opposed to a “routinized regime” of innovation (Almudi et al 2019; Almudi et al 2013; Audretsch 1995; Breschi et al 2000; Dosi et al 1995; Dosi et al 2017; Winter 1984)
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