Growth paths and routes to exit: 'shadow of death' effects for new firms in Japan

Alex Coad, Masatoshi Kato*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)


Research has recently emphasized that the non-survival of entrepreneurial firms can be disaggregated into distinct exit routes such as merger and acquisition (M&A), voluntary closure, and failure. Firm performance is an alleged determinant of exit route. However, there is a lack of evidence linking exit routes to their previous growth performance. We contribute to this gap by analyzing a cohort of incorporated firms in Japan and find some puzzles for the standard view. Our empirical analysis suggests that sales growth generally reduces the probability of exit by merger, voluntary liquidation, and also bankruptcy. However, the relationship is U-shaped—such that rapid growth actually increases the probability of exit. More generally, each of the three exit routes can occur all across the growth rate distribution. Large firms are more likely to exit via merger or bankruptcy, while small firms are more likely to exit via voluntary liquidation.

Original languageEnglish
Pages (from-to)1145-1173
Number of pages29
JournalSmall Business Economics
Issue number3
Publication statusPublished - 2021 Oct
Externally publishedYes


  • Exit routes
  • L25
  • L26
  • M&A
  • Post-entry growth
  • Shadow of death
  • Start-up size
  • Voluntary liquidation

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics


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