Structural Change in Firm Dynamics: From Inter-Firm Network and Geospatial Perspectives

Author Name Gee Hee HONG (International Monetary Fund) / OGURA Yoshiaki (Waseda University) / SAITO Yukiko (Senior Fellow, RIETI)
Creation Date/NO. November 2019 19-P-031
Research Project Dynamics of Inter-organizational Network and Geography
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This paper examines how unprecedented population aging affects firm dynamics in Japan, using the panel data from 2007 to 2016. Our analysis confirms that during this time, average firm age increased due to low rates of firm entry and exit. Average age of CEOs also increased with population aging and low turnover of CEOs. Aging of firms and CEOs is more salient in rural areas than urban areas. Furthermore, as voluntary firm exits are positively correlated with the age of CEOs, more exits are likely to occur as population aging intensifies. In rural areas, low density of firms may imply higher search costs in finding new transaction partners. Firm exit induced by exit of transaction partners is more likely to happen for rural areas. Our results suggest that policies aimed at supporting business succession and addressing increases in voluntary exists should cater to the lifecycle of firms as well as the geographic location of firms.

This is the English version of the Japanese Discussion Paper (18-P-004) with some additional information and changes.