The determinants of firm entry and exit into Greek manufacturing industries : sectoral, temporal and spatial variation

• Main Author: Fotopoulos, Georgios
• Published: London School of Economics and Political Science (University of London) 1998
• Subjects: 910; Geography
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.300320

This research investigates the determinants of firm entry and exit into Greek manufacturing industries during the eighties and early nineties. The first perspective concerns the determinants of sectoral variation of both net entry rates, and gross entry and exit rates. The role of overall macro-economic conditions, in conjunction with the effect of industry-specific structural variables, is the main focus. Net entry rates are difficult to explain using conventional measures of profitability and entry barriers. Some evidence is provided for counter-cyclical patterns in net entry rates post-1985. The determinants of net entry rates for specific industry groups are shown to be significantly different, but strongly correlated across sectors within the same group. Different industry-level factors also underpin entry by varying establishment size, rates of the largest firms exhibiting, in contrast to all other size classes considered, pro-cyclical patterns. Actual entry and exit statistics permit the testing of the symmetry hypothesis - barriers to entry are also barriers to exit - and the issue of a possible simultaneous link between firm entry and exit. The symmetry hypothesis was sustained, but whether or not entry and exit are simultaneous remains unclear. The second perspective is a spatial one. Shift-share descriptions of the variations in net entry rates of manufacturing firms across Greek regions are extended via analysis of variance to allow formal hypotheses testing. The main source of variation stems from variation in net entry in the same industry across regions. Finally, the analysis considers the determinants of variations in new manufacturing plant openings spatially across ten Greek regions. Key findings suggest that new plant opening rates tend to be higher in more specialised regions, in regions with extensive production links and where the local conditions favouring new manufacturing activity are characterised by higher small firm presence, adequate supply of skilled labour and public infrastructure investment.