Industrial Organization

The article presents information about firms from various countries. More specifically, it examines the turnover of companies during entry into a market and exits from the same market. This review will address the following questions: what determines the rate of growth in an organization? Why do new entrants find it challenging to survive in a new market? What determines the longevity of a firm within an industry?  What is the impact of turnover in a firm?


            The article has highlighted several issues relating to the growth of firms, as well as how firms expand after they have been established. The author notes that the rate of growth within a firm depends on the size of the organization. In addition, this growth rate tends to diminish the firm’s size. Based on the article, the size of a firm does not determine the mean rate of growth. However, a decline in the mean growth rate is related to the duration that the firm has been in operation, as well as its size. The mean rate of growth tends to decline as the size of a firm decreases. Other issues that have been highlighted in the article include the entry rate and the survival of the new entrant. From the article, the rate at which firms enter a market does not determine their long-term survival. While there are many firms that might enter a certain market at the same time, not all are guaranteed that they will survive in the long run.

            The author points out that there are high chances that new entrants will only survive for a limited period. This emanates from the competition in the market, which poses a great challenge. In most instances, ventures are discontinued or sold within the first two years of their establishment. Given the high number of new entrants that experience challenges in their first years of operation, it is evident that most firm operators are not sure whether they will succeed in the market. The article has also highlighted the active-learning model and the passive-learning model. Based on the text, the active-learning model can be used to explain trends in the manufacturing sector while the passive-learning model relates to the retail sector. The article also highlights the relationship between entry and exit rates in the industry. From the argument in the article, industries that have high rates of entry are likely to have high exit rates.

            The article has also highlighted the factors that determine the longevity and success of firms. From the author’s observation, some of the factors that contribute to the success of firms in the market include competitive advantage such as unique trademarks. This implies that organizational issues have little to do with the continuity of the firm in the market. Another issue discussed in the article is turnover. The author notes that turnover is an issue that should be given a lot of attention since it determines productivity within a firm. Although the article has comprehensively discussed the issue of industrial organization, it has some limitations. First, the article has narrowed on its focus as it mostly highlights information about firms in the United States and Canada. Little attention has been given to firms in other continents other than North America. Secondly, the article has not provided a detailed explanation of the major reasons why firms opt to discontinue their operations within the first few years of their establishment.

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