Review of Industrial Organization 20: 1–14, 2002.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
New Firms’ Survival and Market Turbulence: New
Evidence from Spain
Departament d’Economia, Universitat Rovira i Virgili, Avda. de la Universitat, 1, 43204 Reus,
Departament de Política Econòmica i EEM, Universitat de Barcelona, Avda. Diagonal, 690, 08034
Abstract. The availability of longitudinal data for individual ﬁrms has allowed the improvement
of the existing knowledge on market structure dynamics. We present additional evidence through
the analysis of a cohort of Spanish manufacturing ﬁrms. Our results conﬁrm some basic empirical
ﬁndings obtained in studies for other countries. According to the behavior of the cohort we study,
Gibrat’s Law does not hold for new entrants. Patterns of market turbulence vary considerably accord-
ing to the type of industry. The behavior of new ﬁrms seems to ﬁt the learning model. The estimation
of a hazard function demonstrates that the main regularities affecting the likelihood of survival of
young ﬁrms are quite similar in different types of countries.
Key words: Entry, ﬁrms, survival, turbulence.
The high rates of turbulence observed at the fringe of all industries have attrac-
ted the interest of experts of the industrial organization ﬁeld for many years. It
has been repeatedly observed that similar patterns of entry and exit of ﬁrms are
prevalent across-countries and along the business cycle. That is, the basic patterns
of market turbulence seem little affected by changes in the level of demand or
different institutional environments, so there must be structural factors that give
way to this persistent phenomenon. The interesting question is how to integrate
the noisy dynamics of entry and exit of ﬁrms into the different industries with the
observed regular patterns of market structure in those same industries, specially the
skewed distribution of the size of the ﬁrms.
This research is supported by grant SEC2000-0882 of the Spanish Ministerio de Ciencia y
ıa. The authors thank the referees for their helpful comments.