Title: Market concentration and new venture survival in static v dynamic industries

Authors: Andrew Burke, Aoife Hanley

Addresses: Bettany Centre for Entrepreneurial Performance and Economics, Cranfield School of Management, Cranfield University, Cranfield, Bedford MK43 0AL, UK. ' Germany Institut fur Weltwirtschaft (IfW) (Kiel Institute for the World Economy), Dusternbrooker Weg 120, Kiel 24105, Germany

Abstract: We propose that the effect of market concentration on firm survival is different according to whether an industry is static (low entry and exit) or dynamic. In our empirical analysis, we find support for this hypothesis. Industry concentration rates reduce the survival of new plants, but only in markets marked by low entry and exit rates. Specifically, a 10% increase in the five-firm concentration ratio in a dynamic market raises the survival rate of new ventures by approximately 2%. Our results have implications for the antitrust/competition law indicating less need for regulation of dominant firms in dynamic industries characterised by high entry and exit rates. We use a unique dataset comprising the population of new ventures that enter the UK market in 1998.

Keywords: new firms; start-ups; new ventures; firm survival; dynamism; competition policy; industry concentration; market concentration; dynamic markets; UK; United Kingdom; antitrust law; competition law.

DOI: 10.1504/IJEV.2010.030980

International Journal of Entrepreneurial Venturing, 2010 Vol.1 No.3, pp.327 - 345

Published online: 15 Jan 2010 *

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