Survival and Distinct Exit Routes of New Firms

This paper explores how the determinants of new-firm duration vary according to exit route: bankruptcy, voluntary liquidation, or merger. Using a sample of new firms in Japan, we provide evidence that the effects of entrepreneur-, firm-, and industry-specific characteristics on new-firm duration are significantly different across exit routes. In particular, the determinants of bankruptcy are fairly different from those of merger. While firms with highly educated entrepreneurs are less likely to go bankrupt, such firms tend to dissolve their businesses voluntarily or be merged by other firms. Our findings suggest that while industry-specific characteristics, such as industry growth and R&D intensity, play a significant role in determining bankruptcy, they do not affect exit through merger.