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Sectoral patterns of firm exit in Italian provinces

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Abstract

There is considerable variation in the firm exit rate across the 103 provinces in Italy. This paper investigates a range of determinants of the exit rate for twelve different sectors in the Italian provinces for a period of eleven years. The analysis shows that the exit rate is positively affected by entry in the previous year (displacement) in the same sector. Previous exit has a different effect for the manufacturing industry as compared to the business services. More specifically, exit persists in manufacturing while in the business services it is rather exit in related sectors in the same province that leads to increased exit, probably due to the loss of clients or suppliers. The presence of industrial districts diminishes exit, especially in two manufacturing sectors (Food and Clothing), Commerce and Transport. Provinces with strong trademark activity appear to have lower exit rates.

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Notes

  1. We have counted the number of times that the word ‘entry’, ‘exit’ or ‘survival’ appears in the title of articles in selected journals for the twenty year period, 1990–2009 (using Econlit). We find the following numbers (entry; exit; survival) for journals in the field of industrial organization: Industrial and Corporate Change (9; 3; 7), International Journal of Industrial Organization (86; 11; 5), Journal of Evolutionary Economics (5; 0; 3), Journal of Industrial Economics (23; 4; 3), RAND Journal of Economics (34; 7; 1), Review of Industrial Organization (39; 11; 11) and Small Business Economics (21; 12; 21). Journals in the field of regional science have considerably fewer articles with the words ‘entry’, ‘exit’ or ‘survival’ (of firms or plants) in the title: Annals of Regional Science (3; 2; 0), Environment and Planning A (4; 1; 0), Journal of Regional Science (3; 0; 0), Regional Science and Urban Economics (5; 0; 1), Regional Studies (5; 3; 1).

  2. Most studies show that the revolving door effect outweighs the displacement effect (Callejón and Segarra 1999).

  3. Note that by including prior year values of the exit rate in the analysis, we may be able to reduce reverse causality.

  4. A Cournot model is unlikely to be a completely realistic description of competition in many markets. However, Aiginger (1996) presents empirical evidence that Cournot models provide a broadly acceptable description.

  5. We leave out one observation: Perugia for the year 1997 because of problems with the Chamber of Commerce registration in the fourth quarter following administrative changes and adjustments (InfoCamere 1996). Hence, the total number of observations amounts to 1132 (i.e., 103 times 11 minus 1).

  6. These sectors correspond to the Italian ATECO 1991 classification: DA15 (Manufacture of food products and beverages), DB17 (Manufacture of textiles), DB18 (Manufacture of wearing apparel, dressing and dyeing of fur), DJ28 (Manufacture of fabricated metal products, except machinery and equipment), F (Construction), G (Wholesale and retail trade; repair of vehicles, motorcycles and personal and household goods), H (Hotels and restaurants), I (Transport, storage and communication), J (Financial intermediation), K70 (Real estate), K72 (Computer and related activities), and K74 (Other business activities such as legal, accounting, bookkeeping and auditing activities, tax consultancy, market research and public opinion polling, business and management consultancy, architectural, engineering and public relations activities).

  7. Public procurement procedures for the implementation of public service contracts between each regional government and Trenitalia (the primary operator of trains within Italy) ensure the availability of high-frequency trains with routes, time schedules and stops specifically designed for the purposes of commuters travelling within the NUTS 2 Region. Under such contracts the contracting authority (Region) subsidizes investments by the train operator in new rail passenger cars.

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Authors and Affiliations

  1. UM School of Business and Economics, Maastricht University, P.O. Box 616, 6200 MD, Maastricht, The Netherlands

    Martin A. Carree

  2. Rotterdam School of Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands

    Ingrid Verheul

  3. Department of Economics, University of Bologna, Piazza Scaravilli, 2, I-40126, Bologna, Italy

    Enrico Santarelli

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  1. Martin A. Carree
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  2. Ingrid Verheul
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  3. Enrico Santarelli
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Correspondence to Enrico Santarelli.

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Carree, M.A., Verheul, I. & Santarelli, E. Sectoral patterns of firm exit in Italian provinces. J Evol Econ 21, 499–517 (2011). https://doi.org/10.1007/s00191-010-0191-3

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