Abstract
This paper analyses the effect of business conditions on new firm starts. The birth of new firms displays a pro-cyclical behaviour, more firms being created when GDP is growing fast and the interest rate is low. The entry response to industry profitability is tempered by the level of sunk costs; for a given profit signal, more entry occurs where sunk costs are low.
| Original language | English |
|---|---|
| Journal | International Journal of the Economics of Business |
| Volume | 3 |
| Issue number | 3 |
| Pages (from-to) | 295-306 |
| Number of pages | 12 |
| ISSN | 1357-1516 |
| DOIs | |
| Publication status | Published - 1996 |
| Externally published | Yes |
Keywords
- Entry
- Business starts
- Sunk costs