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Sunk costs and the growth and failure of small business
Author(s)
Date Issued
2000
Date Available
2009-03-31T14:17:07Z
Abstract
We model the growth and failure of small business in Irish Manufacturing during the period 1973-1994. We estimate the effect of start-up size on the employment growth while controlling for the business cycle, the life cycle and the probability of business survival, amongst other factors. Learning models of firm selection and evolution are accepted in Homogenous Goods but rejected in R&D sectors. Due to high (low) entry and failure costs in R&D (Homogenous Goods) sectors, learning is undertaken ex-ante (ex-post), inducing entry with certainty (uncertainty) concerning ex-post performance, causing Gibrat’s law to hold (fail).
Type of Material
Working Paper
Publisher
Trinity College Dublin. Department of Economics
Series
Trinity Economic Paper Series
No. 2000/2
Copyright (Published Version)
Trinity College Dublin, Department of Economics 2000
Classification
O30
L20
Subject – LCSH
Small business--Ireland
Small business--Growth
Sunk costs
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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