Three Empirical Essays on Startups’ Survival using the Kauffman Firm Survey

Authors

Mohamad Nassereddine, Florida International UniversityFollow

Document Type

Dissertation

Degree

Doctor of Philosophy (PhD)

Major/Program

Economics

First Advisor's Name

Peter Thompson

First Advisor's Committee Title

Committee Chair

Second Advisor's Name

Cem Karayalcin

Third Advisor's Name

Sheng Guo

Fourth Advisor's Name

Hassan Zahedi

Keywords

Entrepreneurship, firms' survival, Women, KFS, Service, Product, Founding conditions

Date of Defense

1-30-2012

Abstract

This dissertation studies newly founded U.S. firms’ survival using three different releases of the Kauffman Firm Survey. I study firms’ survival from a different perspective in each chapter.

The first essay studies firms’ survival through an analysis of their initial state at startup and the current state of the firms as they gain maturity. The probability of survival is determined using three probit models, using both firm-specific variables and an industry scale variable to control for the environment of operation. The firm’s specific variables include size, experience and leverage as a debt-to-value ratio. The results indicate that size and relevant experience are both positive predictors for the initial and current states. Debt appears to be a predictor of exit if not justified wisely by acquiring assets. As suggested previously in the literature, entering a smaller-scale industry is a positive predictor of survival from birth. Finally, a smaller-scale industry diminishes the negative effects of debt.

The second essay makes use of a hazard model to confirm that new service-providing (SP) firms are more likely to survive than new product providers (PPs). I investigate the possible explanations for the higher survival rate of SPs using a Cox proportional hazard model. I examine six hypotheses (variations in capital per worker, expenses per worker, owners’ experience, industry wages, assets and size), none of which appear to explain why SPs are more likely than PPs to survive. Two other possibilities are discussed: tax evasion and human/social relations, but these could not be tested due to lack of data.

The third essay investigates women-owned firms’ higher failure rates using a Cox proportional hazard on two models. I make use of a never-before used variable that proxies for owners’ confidence. This variable represents the owners’ self-evaluated competitive advantage.

The first empirical model allows me to compare women’s and men’s hazard rates for each variable. In the second model I successively add the variables that could potentially explain why women have a higher failure rate. Unfortunately, I am not able to fully explain the gender effect on the firms’ survival. Nonetheless, the second empirical approach allows me to confirm that social and psychological differences among genders are important in explaining the higher likelihood to fail in women-owned firms.

Identifier

FI12042306

Recommended Citation

Nassereddine, Mohamad, "Three Empirical Essays on Startups’ Survival using the Kauffman Firm Survey" (2012). FIU Electronic Theses and Dissertations. 573.
https://digitalcommons.fiu.edu/etd/573