The Birth, Death, and Persistence of Firms: Creative Destruction and the Spatial Distribution of U.S. Manufacturing Establishments, 2000–2006

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Abstract

This article deals with the dynamics of the U.S. manufacturing sector, analyzing the birth, death, and ongoing existence of firms in the beginning of the twenty-first century. Schumpeter's notion of creative destruction is hypothesized to explain the spatiotemporal dynamics of the distribution of manufacturing establishments. We implemented a partial adjustment model that accounts for spillover effects between counties, unknown forms of heteroskedasticity, and spatial autocorrelation. The steady-state equilibrium birth and death rates converged to 6.8 percent and 6.1 percent per year, respectively, during the 2000–06 period. We found that firm birth and death were not decisively affected by a creative destruction process during that period, but firm birth and death positively affect the survival (or persistence) rate of single-unit manufacturing firms.

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