Selection and the Evolution of Industry

Posted: 17 Nov 2009

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Date Written: 1982


Proposes a theory that explains why smaller firms have higher and more variable growth rates than larger firms. Relying on employer heterogeneity and market selection to generate patterns of employer growth and failure, the model states that efficient firms grow and survive while inefficient firms decline and fail, regardless of firm size. However, firms that fail are actually firms that, if given more time to succeed, would have grown more slowly. These slow growing firms are most often smaller firms. Also provided is a behavior characterization of entry and prices in equilibrium, which is defined as a pair of functions that characterize optimal output and exit behavior of firms. (SFL)

Keywords: Industry concentration, Industry evolution, Firm growth, Firm survival, Firm size, Firm efficiency, Startups, Closing firms, Rates of return, Earnings, Organizational learning, Market entry

Suggested Citation

Jovanovic, Boyan, Selection and the Evolution of Industry (1982). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN:

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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New York, NY 10012
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