This paper documents the relative importance of firm, industry and aggregate factors on the post-entry performance of new firms. This study utilizes a unique administrative dataset, T2LEAP, which contains employment and balance sheet information for all incorporated Canadian firms. The data allow us to include financial variables such as the debt-to-asset ratio (leverage) and document their impact on firm survival. We perform duration analysis on all the entrant manufacturing firms during the period 1985-1996. In addition to leverage, we find that: firm characteristics such as size and labour productivity; industry conditions, such as the real exchange rate, the difference in the US-Canada tariff rates, entry penetration, and the capital-labour ratio; and aggregate conditions in terms of the yield gap also play a role in the survival prospects of new firms. Crown Copyright

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Keywords Duration models, Financial leverage, Firm survival, Productivity
Persistent URL dx.doi.org/10.1016/j.strueco.2012.03.008
Journal Structural Change and Economic Dynamics
Citation
Huynh, K.P. (Kim P.), Petrunia, R.J. (Robert J.), & Voia, M.-C. (2012). Duration of new firms: The role of startup financial conditions, industry and aggregate factors. Structural Change and Economic Dynamics. doi:10.1016/j.strueco.2012.03.008