Do Temporary Demand Shocks Have Long-Term Effects for Startups?

110 Pages Posted: 17 Aug 2019 Last revised: 19 Apr 2021

See all articles by Hans K. Hvide

Hans K. Hvide

University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Tom Meling

University of Bergen; University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2020

Abstract

Using procurement auctions and register data, we find that temporary demand shocks have long-term effects on startup outcomes. Startups that win a procurement auction are more than 20% larger in terms of sales and employment than startups that narrowly lose an auction, even several years after the contract work has ended. The effects are unique to startups and economically large; about 50% of the contract value is transmitted into long run sales. The analysis suggests learning-by-doing from contract work as a plausible mechanism. Overall, our results point to the importance of path dependence in shaping the long-term outcomes of startups.

Keywords: entrepreneurship, path dependency, startups

JEL Classification: JEL D21, D24, J23, L11, L25, G39

Suggested Citation

Hvide, Hans and Meling, Tom, Do Temporary Demand Shocks Have Long-Term Effects for Startups? (June 16, 2020). Available at SSRN: https://ssrn.com/abstract=3437270 or http://dx.doi.org/10.2139/ssrn.3437270

Hans Hvide

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

HOME PAGE: http://hans.hvide.googlepages.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tom Meling (Contact Author)

University of Bergen ( email )

Fosswinckelsgt. 6
Bergen, N-5007
Norway

HOME PAGE: http://https://sites.google.com/site/tomgrmeling/

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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