Turnover resulting from firm entry, exit has greatest impact
Between 2000 and 2007, firm turnover contributed positively to the growth of productivity in most service industries, according to a new Statistics Canada study.
During this seven-year period, firm turnover varied across service industries. Turnover can result from the entry of new firms and the exit of others or it may also be a result of shifts of market share between incumbent firms that are either growing or declining, said Statistics Canada.
Turnover that was a result of firms entering and exiting the industry was the most important contributor to the growth of productivity, said Statistics Canada.
Business services and trucking had the highest effective entry rates.
The process of re-allocating market share also varied across industries. In 2007, the market share gained by firms that entered since 2000 was highest in business service (up 29.6 per cent) and trucking (up 22.8 per cent), while it was less than 10 per cent in the other service industries. Broadcasting gained 2.4 per cent in market share, the slowest increase.
While entry processes were quite different across industries, there was much greater similarity in the exit rates across industries. The percentage of entrants remaining after six years was about the same in the various service industries studied, said Statistics Canada.
The study examined the relationship between firm turnover and productivity growth in a range of service industries, including wholesale trade, transportation and warehousing, air transportation, truck transportation, broadcasting and telecommunications, business services and financial services.
