Kauermann, Göran and Tutz, Gerhard
Vanishing of Risk Factors for the Success and Survival of Newly Founded Companies.
Collaborative Research Center 386, Discussion Paper 242
The success of a newly founded company or small business depends on various initial risk factors or staring conditions, respectively, like e.g. the market the business aims for, the experience and the age of the founder, the preparation prior to the launch, the financial frame, the legal basis of the company and many others. These risk factors determine the chance of survival for the venture in the market. However, the effects of these risk factors often change with time. They may vanish or even increase with the time the company is in the market. In this paper we analyse the survival of 1123 newly founded companies in the state of Bavaria, Germany. Our focus is thereby primarily on the investigation of time-variation of the initial factors for success. The time-variation is thereby tackled within the framework of varying coefficient models, as introduced by Hastei and Tibshirani (1993, J.R.S.S. B.), where time modifies the effects of risk factors. An important issue in our analysis is the separation of risk factors which have time-varying effects from those which have time-constant effects. We make use of the Akaike criterion to separate these two types of factors.