Do Services differ from Manufacturing? The Post-Entry Performance of Firms in Dutch Services

Abstract

A large literature has emerged focusing on the post-entry performance of firms and, in particular, on the links between firm growth, survival, size and age. While these studies have resulted in findings that are sufficiently consistent as to constitute stylized facts, virtually all of these studies are based on manufacturing. The purpose of this paper is to fill this gap in knowledge about the role of non-manufacturing in industrial organization and, in particular, in the post-entry performance of firms, or what happens to firms subsequent to entering an industry. We suggest theoretical reasons why the relationships between firm age and size on the one hand, and survival and growth on the other may, in fact, not be the same in services as they are for manufacturing. We use a longitudinal database for Dutch firms in the retail and hotel and catering sectors to identify around 13, 000 new-firm start-ups and 47, 000 incumbents in the services and track them over subsequent years. We are then able test to see whether the stylized results identified, based on manufacturing, still hold in the services. The results suggest that the most fundamental relationships between firm size, age, survival and growth are strikingly different for services than for manufacturing. In terms of the dynamics of industrial organization, services may, in fact, not simply mirror the manufacturing sector.

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