Carlos Carreira (Universidade de Coimbra), Paulino Teixeira

Does Schumpeterian Creative Destruction Lead to Higher Productivity? Evidence on Entry and Exit in Portuguese Manufacturing

This study examines the firm dynamics (namely the entry and exit of firms) and their contribution to industry productivity growth. We used an original and statistically representative unbalanced panel of Portuguese manufacturing firms (1991-2000). As expected, the entry and exit rates were very substantial. The entry market shares of newly created firms were very small but new firms did tend to show strong market share growth rates. Entrants were less productive than incumbents, but the differences in productivity tended to vanish very quickly. Exitors were shown to be less productive than entrants. Our decomposition of the sources of productivity growth showed that a large percentage of industry-level productivity growth could be imputed to firm dynamics.

Keywords: Entry and Exit; Creative Destruction, Productivity Growth; Industrial Dynamics

JEL Codes: D21, D24, L60, O40, O47

Session: 5e   Room 2004   Category: Business demographics and performance 2

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