A multistate demographic model for firms in the province of Gelderland

The concept of the cohort is also relevant in firm demography (van Wissen, 2002).
According to Stinchcombe (1965) the circumstances at the time of founding of a firm
have in imprint on the future behaviour of the firm. Firms have only limited capabilities
to adapt to changing environments. Moreover, new generations of entrepreneurs of
bring with them new ideas, technologies, innovations, and ways of doing things that
reflect the level of technology, but also culture, institutions and socio-economic
environment of that time.

This paper investigates the separate effects of the age, period and cohort dimension in
decomposing time effects in firm mortality. It uses the demographic model of the age-
period-cohort decomposition. The standard APC model does not have explanatory
connotations: it is in essence an accounting framework that decomposes change over
time in three dimensions. As will be discussed below, the model as specified here can
be extended by introducing explanatory variables. This extension allows us to test if
economic sector, geographical environment and size have any explanatory value for
firm mortality.

The paper is organized as follows. In section 2 we introduce the APC model. Section 3
describes the data used, and section 4 deals with the results. The final section concludes.

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