International competition and small-firm exit in US manufacturing

This study analyzes both the determinants of small firm exit rates in US manufacturing over the 1989-2004 period, especially the reaction of domestic firms to the nature of foreign competition as measured by industry-specific real exchange rate movements (interacted with import penetration by industry). These international pressures seem to lead to increased rates of smallest-firm exit in manufacturing, though the magnitudes of these effects are smaller than sometimes discussed. However, high-tech industries avoid much of this impact; patents and a reputation for innovation may shield a small firm somewhat from lower-priced foreign competitors. © 2013 EEA.