Firm age: a survey

Research output: Contribution to journalArticle

22 Citations (Scopus)

Abstract

This survey paper synthesizes theory and evidence on processes of firm-level aging. We discuss why anthropomorphic analogies are not helpful for understanding firm aging, because of differences in population pyramid shapes (with around 50 % of firms exiting after just 3 years), no upper bound on firm ages, and no deterministic change in performance with firm age. We discuss the liabilities of newness, adolescence, and senescence and obsolescence, and define what we mean by the direct and indirect causal effects of age. Our causal model also helps clarify previous confusion about why controlling for size in regressions of firm age on survival can reverse the results (Simpson’s paradox and the ‘bad control’ problem). While aging processes can occur at many levels (employee-level, firm-level, cohort-level, etc.), we focus on the firm-level. We summarize empirical work on firm age and conclude that the most interesting age effects occur within the first 5–7 years, which underscores the importance of datasets that do not under-represent young firms.

Original languageEnglish
Pages (from-to)13-43
Number of pages31
JournalJournal of Evolutionary Economics
Volume28
Issue number1
DOIs
Publication statusPublished - 2018 Jan 1
Externally publishedYes

Keywords

  • Firm age
  • Firm size
  • Liability of newness
  • Liability of obsolescence
  • Survival

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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