Power Law Distribution of the Frequency of Demises of U.S Firms

Details Power Law Distribution of the Frequency of Demises of U.S Firms Power Law Distribution of the Frequency of Demises of U.S Firms

2002-12-09

arxiv.org/abs/cond-mat/0212186v1

Physics

Condensed Matter

Statistical Mechanics

8 pages, 2 figures

Scientific paper

10.1016/S0378-4371(02)01955-6

Both theoretical and applied economics have a great deal to say about many aspects of the firm, but the literature on the extinctions, or demises, of firms is very sparse. We use a publicly available data base covering some 6 million firms in the US and show that the underlying statistical distribution which characterises the frequency of firm demises - the disappearances of firms as autonomous entities - is closely approximated by a power law. The exponent of the power law is, intriguingly, close to that reported in the literature on the extinction of biological species.

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