Satu Nurmi (Helsinki School of Economics and Statistics Finland)

Sectoral Differences in Plant Start-up Size

New knowledge on the factors behind the choice of plant entry scale is important for understanding the entry process and the recruitment decisions of new plants in different sectors of the economy. The purpose of this paper is to evaluate the effect of various industry attributes on plant start-up size, measured with employment, using data on the whole Finnish business sector. The paper extends previous research by examining the differences between manufacturing and services and by using a richer set of explanatory variables. The unobserved plant level heterogeneity is taken into account by using quantile regression approach. The results for manufacturing and services are remarkably similar. However, the findings imply that in the future analysis it is also important to consider the effect of the regional availability of educated and experienced work force on plant start-up size in these two sectors. The findings also suggest that scale economies and industry turbulence are more important for the start-up decision of the largest entrants than the smaller ones. Furthermore, large entrants are more likely to enter industries where foreign trade plays an important role. The results also show that the different environment faced by new plants belonging to firms with multiple plants has to be taken into account.

The findings suggest that scale economies and industry turbulence are more important for the start-up decision of the largest entrants than the smaller ones. Furthermore, large entrants are more likely to enter industries where foreign trade plays an important role. The results also show that the different environment faced by new plants belonging to firms with multiple plants has to be taken into account. Further analysis is needed to shed light on the relationships between the availability of educated and experienced work force in the industry and plant start-up size.

Keywords: Entry, start-up size, industry differences, quantile regression

JEL Codes: J21, J23, L11, L25

Session: 3b   Room 2001   Category: Firm size

Paper