Business failure of new software firms

Abstract

This paper investigates business failure of newly-established software firms. Using a proportional hazards model, we estimate the determinants of business failure among software firms in Japan founded during 1986–1995. The main findings of this paper are as follows. First, software firms with sufficient size or paid-up capital are less likely to fail. Secondly, vertical integration increases the probability of failure. Thirdly, manager's attributes, such as age, affect the probability of failure. Finally, local agglomeration increases the probability of failure, while macroeconomic growth decreases the probability.