Files
Abstract
The entry and exit decisions, considered as investment decisions, are
investigated in the paper. Taking into account the heterogeneity of entry and
exit, the analysis is based on two types of entry-exit: real (related to the
establishment or closing of a firm), or entry-exit in a new sector (indicating the
diversification or changing specialisation). The theoretical model is based on
Marshallian trigger points with Real Option trigger points as an alternative.
The estimation exploited the negative binomial model to investigate the role of
trigger points (thresholds) on the observed number of entry or exit firms in
Dutch glasshouse horticulture over 25 years. Firms should overcome different
thresholds depending on types of entry and exit. Marshallian trigger points
function as good as the ones based on Real Option theory. The estimation of
the model, which takes into account expected output prices, uncertainty and the
interest rate, however, provides the best explanation of entry and exit. That
model can be considered of a flexible variant of Real Option theory. The model
provides plausible elasticities of entry and exit, either real or in changing
specialisation.