Abstract
Amid increasing interest in firm age and its effects on firm performance, this special issue offers an exhaustive review of the literature and a novel collection of evidence on the effects of firm age on performance, including a special focus of interest on innovation performance, financial performance, exports, survival and growth. This editorial positions the theme in the extant literature, and provides key definitions and challenges ahead in the field of evolutionary economics. It introduces the collection of articles composing the special issue. The papers offer a diversity of country contexts, as well as analytical approaches and methods. They include an exhaustive review of the literature on age and firms’ performance, and present original empirical studies focusing on the effects of age on firms’ economic outcomes on the one hand, and on innovation outcomes on the other hand. While most of the papers use econometric analysis, the level of analysis ranges from firm to individual.
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Notes
According to Ophir's (2016) “wild card” Ngram search technique, starting with search terms “firm age *” and then “firm age and *” [analysis performed on 15 June 2017].
Faced with the question “how big is Mrs. Smith” most persons would reply in terms of weight or height, whereas an alien having learned about the concept “size” from an economist would reply in terms of Mrs. Smith’s income, number of working hours, or perhaps volume of inputs (food and drink).
Some scholars, such as Loderer et al. (2017, p. 2), suggest that there may be “reverse causality” between firm age and performance in the form of a selection bias that may arise from unsuccessful young firms being more likely to be selected out of the population. However, we do not agree that this selection bias can be called “reverse causality”, because a firm’s performance cannot influence a firm’s age (see e.g. Peters et al. 2017, Section 1.3). Firm performance may have a causal influence on survival (i.e. whether age will subsequently be observed or not), and hence the age distribution of the population, but not firm age itself. If we focus on an unbalanced panel, aggregate performance may evolve with the shifting population of survivors, but performance can never slow down or accelerate a firm’s age. In a balanced panel of firms that we know will survive until the end of the sample, all selection effects will have been removed, allowing the researcher to focus exclusively on internal developmental effects of age on performance.
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Coad, A., Holm, J.R., Krafft, J. et al. Firm age and performance. J Evol Econ 28, 1–11 (2018). https://doi.org/10.1007/s00191-017-0532-6
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DOI: https://doi.org/10.1007/s00191-017-0532-6