title: The mortality of companies.
abstract: The firm is a fundamental economic unit of contemporary human societies. Studies on the general quantitative and statistical character of firms have produced mixed results regarding their lifespans and mortality. We examine a comprehensive database of more than 25 000 publicly traded North American companies, from 1950 to 2009, to derive the statistics of firm lifespans. Based on detailed survival analysis, we show that the mortality of publicly traded companies manifests an approximately constant hazard rate over long periods of observation. This regularity indicates that mortality rates are independent of a company's age. We show that the typical half-life of a publicly traded company is about a decade, regardless of business sector. Our results shed new light on the dynamics of births and deaths of publicly traded companies and identify some of the necessary ingredients of a general theory of firms.
authors.affiliation: Santa Fe Institute, Santa Fe, NM, USA Integrated Studies in Land and Food Systems, University of British Columbia, Vancouver, British Columbia, Canada.
authors.forename: Madeleine I G
authors.initials: MI
authors.lastname: Daepp
authors.affiliation: Santa Fe Institute, Santa Fe, NM, USA School of Human Evolution and Social Change, Arizona State University, Tempe, AZ, USA marcusj@santafe.edu.
authors.forename: Marcus J
authors.initials: MJ
authors.lastname: Hamilton
authors.affiliation: Santa Fe Institute, Santa Fe, NM, USA Department of Mathematics, Imperial College London, London, UK.
authors.forename: Geoffrey B
authors.initials: GB
authors.lastname: West
authors.affiliation: Santa Fe Institute, Santa Fe, NM, USA.
authors.forename: Luís M A
authors.initials: LM
authors.lastname: Bettencourt
mesh_terms: D003132:Commerce / Q000706:statistics & numerical data*; D016208:Databases, Factual; D007221:Industry / Q000706:statistics & numerical data*; D018803:Models, Economic; D015233:Models, Statistical; D009656:North America; D017149:Private Sector / Q000706:statistics & numerical data*
keywords: firm longevity; mergers and acquisitions; stock markets; survival analysis
references.citation: Science. 2001 Sep 7;293(5536):1818-20
references.pmid: 11546870