IS EXIT A FIRM FAILURE? FACTS AND THEORY

• Type: Article in International Scientific Journal
• Date: 2010

Authors

Marques, A (Author) Other; António Brandão (Author) FEP

Journal

Title: Acta Oeconomica

Vol. 60 No. 4

Pages: 405-426

ISSN: 0001-6373

Publisher: Akademiai Kiado

Indexing

ISI Web of Knowledge - 2 Citations

ISI Web of Science

Scopus - 1 Citation

Econlit

Scientific classification

FOS: Social sciences > Economics and Business

Other information

Authenticus ID: P-003-05S

DOI: 10.1556/aoecon.60.2010.4.3

Abstract (EN): Literature on firms' entry and exit decisions provides empirical evidence that industries with many exits also have many entries. We present a paper that merges some different approaches to the entry and exit of firms and which proposes a new method for looking at the entrepreneurial decision. Our model theoretically supports what empirical evidence has shown and holds; that databases are not yet developed enough to understand the whole exit process. We demonstrate that the possibility of recovering some share of investment costs makes entry more than just a production decision. Within a defined time horizon, a firm can enter the market despite making a loss from production output since the firm's return consists of both sales and investment cost recovery. Entry may be the optimal strategy even when the unit cost is higher than the market price.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 22