Entry and exit of plants into UK manufacturing industries, 1974-97

Abstract

Empirical work in relation to the entry and exit of plants in UK manufacturing industries has been affected by a lack of information available to researchers. This thesis provides evidence on the entry and exit of plants in UK manufacturing industries during the 1974-97 period, using the newly released ARD dataset. In order to provide a better understanding of entry and exit of plants the following aspects were investigated: 1) the magnitude of plant entry and exit in UK manufacturing sectors during the 1974-97 period; 2) the determinants of the entry decision; and 3) the determinants of the exit decision. The findings revealed that UK manufacturing industries were characterised by a high-level of dynamics. Competition was intense and was increasing especially towards the end of the 1990s period. Therefore, the notion of "creative destruction" appeared to be of particular relevance in UK manufacturing industries. In studying the entry decision, new plants were divided into three categories: 1) those opened by domestic de-novo firms; 2) those opened by domestic incumbents; and 3) those opened by foreign firms. It was found that: 1) different types of entrants showed significant differences in their entry behaviour; 2) both industrial and geographical specific factors affect the entry decision; 3) the role played by the industry life cycle could not be ignored, as the effect of some factors on entry significantly differed across the two different stages of the industry life cycle; and 4) fundamental differences between the northern and southern regions of the UK significantly affected the impact of given factors on entry. In studying the exit decision the most important findings were: 1) the role that the age of a plant played in determining the impact of some variables on its risk of closure; and 2) the positive impact of change in ownership on the risk of closure of plants.