A Firm's First Year

Arbeitspapier

This paper determines the structural shocks that shape a firm's first year by estimating a structural model of firm growth, learning, and survival using monthly sales histories from 305 Texas bars. We find that heterogeneity in firms' pre-entry scale decisions accounts for about 40% of their sales' variance; persistent post-entry shocks account for most of the remainder. We find no evidence of entrepreneurial learning. Variation of the firms' fixed costs consistent with an annual lease cycle explains their exit rates. We use the estimated model to price a new bar's option to exit, which accounts for 124% of its value.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 05-046/3

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Truncated and Censored Models; Switching Regression Models ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Sports; Gambling; Restaurants; Recreation; Tourism
• Subject: firm exit ; option value ; fixed costs ; Bayesian learning ; Unternehmenswachstum ; Unternehmenserfolg ; Lernende Organisation ; Theorie ; Marktaustritt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Abbring, Jaap H. ; Campbell, Jeffrey R.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/86234
• Last update: 10.03.2025, 11:42 AM CET