The Resource-Based Theory of the Firm

This paper examines the determinants of firm survival. We use hazard models to test a number of hypotheses mainly drawn from the Resource-Based Theory of the Firm. According to the Resource-Based View the ability of a firm to develop distinct capabilities enhances its ability to adapt to the changing competitive environment and improves its survival prospects. The results confirm that firms that develop firm- specific assets through advertising and making R&D (inde- pendently of the technological intensity of the industry) enjoy better survival prospects. Furthermore, failure risk increases up to about 20 years of trading, and then decreases to later rise in line with liability of "adolescence" and "senescence."

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