Firm performance and markets: survival analysis of medium and large manufacturing enterprises in Indonesia

Rifai Afin1, Keresztély Tibor1, Cserháti Ilona1
1Corvinus University of Budapest, Budapest, Hungary

Tóm tắt

This study identifies the effect of firm performance, especially efficiency, on firm survival. This study applies efficiency calculations using a translog model based on both time-invariant and time-varying production functions and the Ackerberg–Caves–Frazer (ACF) model to overcome the endogeneity problem in the estimation of the production function. The data used are firm-level data, which are medium and large manufacturing company censuses with an observation period from 1995 to 2015. This study used two estimation techniques: the Cox proportional hazard model and Poisson regression. I estimate the Cox regression with firm-level data, whereas the Poisson regression is estimated with aggregate data for 2-digit ISIC. Estimates at the aggregate 2-digit ISIC level are intended to not only see the effect of efficiency on companies that survive but also on companies that enter and exit. Firm-level evidence shows that a company’s efficiency reduces the hazard ratio or increases its survival time. Moreover, consistent with firm-level results, the aggregate-level estimation shows that efficiency increases the chances of survival and entry of companies into Indonesia and reduces the rate of company exit from the Indonesian market. This shows that a company's level of technical efficiency makes an important contribution to the survival of manufacturing companies in Indonesia.

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