Age-dependent business failures in the US construction industry

Abstract

Age-dependent failure in the construction industry is explored over two 11-year periods (1973–1983 and 1984–1994) by analysing the age distribution of failed construction companies in each year and computing age-specific failure probabilities over a 10 year period (1985–1994). The conflicting perspectives of organizational theory are reconciled by taking advantage of the complementary nature of the adaptationist and organizational ecology theories while the effects of the characteristics of the construction industry are also considered. The research findings reveal an age-dependent business failure pattern in the US construction industry where the risk of failure increases initially with increasing age, reaches a peak point and decreases thereafter as companies grow older. Newness of a construction company which implies lack of organizational learning and lack of legitimacy, appears to be the main factor explaining this pattern.

Keywords:

• Construction Company
• Business Failure
• Adaptation
• Inertia
• Learning
• Legitimacy