Firm Exits as a Determinant of New Entry: Is There Evidence of Local Creative Destruction?

27 Pages Posted: 5 Dec 2005 Last revised: 28 Sep 2013

See all articles by Aviad Pe'er

Aviad Pe'er

Independent

Ilan Vertinsky

University of British Columbia (UBC) - Sauder School of Business

Date Written: december 30, 2007

Abstract

The study posits that the causal links between entry and failure rates also flow from failure to entry. As older firms fail, resources are recycled by new entrants permitting local renewal. Failure levels affect both the intensity of the entrepreneurial search for opportunities and the opportunity landscape facing entrepreneurs. Persistent high failure rates, however, provide signals about the difficulties of succeeding in a particular location. The model is tested using a unique longitudinal panel database made available by Statistics Canada, which encompasses the entry and exit of all Canadian enterprises between 1984 and 1998.

Keywords: Failure, Opportunities, Entry, Local Renewal

JEL Classification: L10, R12

Suggested Citation

Pe'er, Aviad and Vertinsky, Ilan, Firm Exits as a Determinant of New Entry: Is There Evidence of Local Creative Destruction? (december 30, 2007). Journal of Business Venturing, Forthcoming, Tuck School of Business Working Paper No. 2005-30, Available at SSRN: https://ssrn.com/abstract=861085 or http://dx.doi.org/10.2139/ssrn.861085

Ilan Vertinsky

University of British Columbia (UBC) - Sauder School of Business ( email )

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