Nicola Brandt (OECD)

Business Dynamics in Europe

This study presents evidence on firm entry and exit, growth and survival derived with new data from Eurostat, covering nine European Union member countries. One contribution of the study is an analysis of the role of data quality for studies of firm demographics. Confronting results obtained with the Eurostat data with those of a previous OECD cross-country firm-level data project reveals that different size thresholds and difficulties to distinguish genuine firm entry and exit from mergers & acquisitions, ownership changes or changes in legal form can have sizeable impacts on results. Cross-country differences in firm entry and exit rates are analysed with a special emphasis on detailed information and communication technology (ICT) related sectors, which has not been possible with previously available cross-country data. After controlling for some basic factors, such as countries’ industry composition, cross-country differences in entry and exit rates in mature sectors turn out to be negligible, while differences in entry and exit rates in the younger ICT related industries are much larger. This suggests that a potential role for policies and institutions to shape business dynamics may be especially important in those sectors which are thought to have played an important role for innovation and technology adoption in recent years. Further, the paper analyses new firm survival and provides a discussion of how cross-country firm-level data can be used to analyse the effects that economic policy may have on aggregate patterns of employment, output and productivity growth via its impact on firm entry and exit, growth and survival.

Keywords: entry, exit, survival, micro data

JEL Codes: L11, G33, M13, C81

Session: 2a   Auditorium   Category: Innovative uses of business register data

Paper