Manufacturing Plant Survival in a Period of Decline

Abstract

We examine the effects of individual plant and local characteristics on explaining survival of manufacturing plants over the last two recessions. We link the establishment‐level Rural Manufacturing Survey to longitudinal establishment employment records (Quarterly Census of Employment and Wages) and examine establishment survival using a Cox proportional hazards model. We find that independent and smaller plants were most likely to survive this period of manufacturing decline (1996–2011) and their survival was more affected by local context than establishments which are part of a multi‐plant firm. Among independent plants, we find that those in metropolitan counties had higher hazard rates despite finding access to local markets being a driver of survival. Plants located in more competitive counties had higher hazard rates.

Interaction effects between the agglomerative externalities affecting the survival of small startups

“…However, “specialization” and “diversification” were not significant variables. These results are consistent with previous studies on Germany (Buenstorf & Guenther, ) and the U.S. (Low & Brown, ; Renski, ). That is, the results of analyzing the small start‐up firms in the whole industry mean that the Porter‐type externality could also have a negative effect in terms of firm survival, despite contributing to regional growth through knowledge transfer based on the competitive industrial condition.…”

“…First, meaningful initial factors contain not only the firm's own attributes, such as size, age, industrial field, ownership structure, financial condition, and technological innovation ability but also the founder's features, such as educational level, gender, and previous operational experience (Buenstorf & Guenther, ; Cefis & Marsili, ; Chung & Song, ; Gieure & Buendía‐Martínez, ; Jeon, Park, & Park, ; Kang & Lee, ; Kim & Lee, ; Lee, ; Song & Noh, ; Song & Sim, ; Tveterås & Eide, ). Second, other significant factors are related to external conditions, such as characteristics of the industry field that a firm belongs to, the spatial environment a firm is located in, and economic conditions (Christie & Sjoquist, ; Farinha, ; Geroski et al, ; Kim, Jang, & Do, ; Lee & Moon, ; Low & Brown, ; Nunes & Sarmento, ), which have been stressed by the importance of firm location, despite their relatively small influences in the empirical studies after the 2000s.…”

“…However, many economists and policy makers pay attention to the importance of startups' performance after entry based on efficiency using inputs and outputs (Khoshnevis & Teirlinck, ), or their survival (Audretsch, ; Gémar, Moniche, & Morales, ), because long‐term survival would be relatively more difficult, despite the market entry being easily supported (Tveterås & Eide, ). In terms of individual firms, their survival or continuance is one of the most important proxy variables for their performance after market entry (Low & Brown, ). As a result, in aspects of national and regional economies, the survival or continuance of firms could also contribute not only to achieving the long‐term goals of job creation and economic growth but also to understanding the complex structure of industrial development in a region (Buenstorf & Guenther, ).…”

“…The key question in these studies is what factors affect the survival—in other words, closure or duration—of a firm, and studies have shown different results for various industrial sectors and countries . Additionally, previous empirical studies from various perspectives, in conjunction with not only location conditions but also urban and regional economics, have been recently published (Basile, Pittiglio, & Reganati, ; Cainelli, Montresor, & Marzetti, ; Geroski, Mata, & Pedro, ; Howell, He, Yang, & Cindy Fand, ; Low & Brown, ; Pe'er & Keil, ; Tavassoli & Jienwatcharamongkhol, ; Neffke, Henning, & Boschma, ).…”

Rural business programs and business performance: The impact of the USDA's Business and Industry (B&I) Guaranteed Loan Program

“…The risk of the exit of an independent establishment is about 98–88% lower than the hazard rate for multiunit establishments within the first 2–6 years after the loan. This result is in line with recent research (Christie & Sjoquist, ; Low & Brown, ) that focuses on business survival. One possible reason, based on Low and Brown (), may be that independent establishments have greater flexibility in their decision‐making than establishments that are part of multiunit firms.…”