Firm and Product Life Cycles and Firm Survival

It is shown that firm survival is crucially dependent on both the product and the firm lifecycles. With regard to the firm lifecycle, there appear to be 2 spans of time over which hazard rates decline. The decline continues until the obsolescence of initial endowments finally raises hazard rates. It...

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Bibliographic Details
Published in:The American economic review 2002-05, Vol.92 (2), p.184-190
Main Authors: Agarwal, Rajshree, Gort, Michael
Format: Article
Language:English
Subjects:
Age
Business failures
Competition
Consumer goods
Decomposition
Economic models
Economic theory
Endowment
Endowments
Enterprises
Hypotheses
Industrial cycles
Industrial market
Innovations
Learning rate
Life cycles
Market
Net investment
New products
Product life cycle
Product life cycles
Product markets
Regression analysis
Studies
Survival rates
Technological Change
Technology
Variables
Volatility
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Summary:It is shown that firm survival is crucially dependent on both the product and the firm lifecycles. With regard to the firm lifecycle, there appear to be 2 spans of time over which hazard rates decline. The decline continues until the obsolescence of initial endowments finally raises hazard rates. It is also shown that hazard-rate functions have different baselines across bases of the product lifecycle, with higher rates occurring in the later phases due to market maturity and increased competitiveness. The effect of industry lifecycle phases is also seen in the systematic shift of the point at which obsolescence of endowments begins to take effect.
ISSN:0002-8282
1944-7981
DOI:10.1257/000282802320189221