Micro-Econometric Survival Analysis of New Businesses

Abstract

It has been said that the great thing about starting your own business is that you get to decide which 24 hours of the day you will work. Maybe it is owner exhaustion that leads to such a high failure rate among new businesses! Joking aside, though, the subject of new business failure has generated extensive empirical research using econometric methods of survival time analysis, covering numerous countries as well as varying time periods. Nevertheless, it is worth revisiting this topic for at least two reasons: First, while industry characteristics are broadly taken into account in micro-econometric survival time analyses, the same is not true of the regional dimension. One main reason for this deficit may be the lack of adequate data for considering the regional dimension. However, if the regional dimension of the data is not considered, estimates may be inefficient and the standard errors may be estimated wrongly due to regional dependency in the error terms.

Keywords

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A modified version of this chapter is published in Applied Economics (Taylor & Francis) with the title Survival Chances of New Businesses: Do Regional Conditions Matter?