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3. Data and method 3.1. Data sources The data set employed in this paper comes from the TSR Data Bank compiled by Tokyo Shoko Research (TSR), which is one of the major credit investigation com- panies in Japan. As a public data source, for example, the Establishment and En- terprise Census reports the numbers of entrants and exits, based on establishments, in each industry or region. However, it is quite difficult to obtain individual data from public data sources, and, in general, we cannot identify which establishment (or firm) is active or extinct using these sources. In addition, when these sources are used, there is the possibility that the relocation of an establishment to another region is regarded as an exit even though the establishment remains in the market. Consequently, when using these sources, we face difficulties identifying whether the firm really has exited the market. On the other hand, the TSR Data Bank provides information not only on whether the firm exits but also on which form the exit takes. By using the TSR Data Bank, we are able to determine whether the firm exits the market. The data set consists of manufacturing firms founded between 1997 and 2004, and includes information on the survival and exit of these firms up to 2009. Using information on the form of exits, provided by the TSR Data Bank, we classify exits into three forms: bankruptcy, voluntary liquidation, and merger. The TSR Data Bank also provides data on firm-specific characteristics, such as legal forms and the number of employees, in addition to information indicating whether or not the firm has survived. Moreover, this source provides data on entrepreneur-specific characteristics, including date of birth and educational background. Regarding industry-specific characteristics, data on capital intensity, price–cost margins, and industry growth at the three-digit Standard Industrial Classification (SIC) level in each industry are obtained from the Report by Industry, Census of 8
Manufactures compiled by the Ministry of Economy, Trade, and Industry (METI). 6 Data on research and development (R&D) intensity at roughly the three-digit SIC level are taken from the Results of Basic Survey of Japanese Business Structure and Activities by the METI. In addition, data on gross entry rate at the three-digit SIC level are obtained from the Establishment and Enterprise Census published by the Ministry of Internal Affairs and Communications (MIC). 7 With respect to region-specific characteristics, we obtain data on the number of establishments for the two-digit SIC level at the prefecture level from the Estab- lishment and Enterprise Census. 8 As for regional economic conditions, we use data on the annual unemployment rate in each prefecture from the Labor Force Survey of the MIC. 3.2. Different forms of exit As explained above, we classify exits into three forms—bankruptcy, voluntary liquidation, and merger—using the classifications in the TSR Data Bank. In this paper, ‘bankruptcy’ indicates the situation in which firms cannot repay their debts and thus cease operations. The bankruptcy group includes those firms applying for court protection under the Bankruptcy Law, as well as those applying for it under the Corporate Rehabilitation Law and the Civil Rehabilitation Law enacted in Japan in April 2000. In addition, firms whose bills payable are no longer honored by banks 6 Unfortunately, industrial classifications changed during the observation period, and for several industries, we could not match the classifications at the three-digit SIC level between the periods before and after the changes in the SIC. For these industries, we used data at the two-digit SIC level, instead of the three-digit SIC level. In addition, when data were not available for a year at the three-digit SIC level, because data were concealed for reasons of confidentiality, we used instead the average values for these industries in other years during the observation period or values at the two-digit SIC level. 7 The Establishment and Enterprise Census surveys gross entry rates every three or five years. Therefore, we used the values of gross entry rates between 1996 and 2001 divided by five for firms founded during the period 1997 to 2001 and the values of gross entry rate between 2001 and 2004 divided by three for firms founded during the period 2002 to 2004. 8 Because the values of the number of establishments at the two-digit SIC level are available for 1996 and 2001, we used the values in 1996 for firms founded during the period 1997 to 2000 and the values in 2001 for firms founded during the period 2001 to 2004. 9
Page 2 and 3: DISCUSSION PAPER SERIES Discussion
Page 4 and 5: 1. Introduction Many new firms exit
Page 6 and 7: which is required to achieve econom
Page 8 and 9: how these environments shape each f
Page 12 and 13: are regarded as bankrupt even if th
Page 14 and 15: holds for all situations. In additi
Page 16 and 17: assets to shipments in the year of
Page 18 and 19: exit of new firms of regional agglo
Page 20 and 21: cational background as a determinan
Page 22 and 23: 5.2. Estimation results Using the C
Page 24 and 25: umn (ii) of Table 5. This result su
Page 26 and 27: capital intensity does not have sig
Page 28 and 29: 6. Conclusions This paper has explo
Page 30 and 31: References Acs, Z. J., C. Armington
Page 32 and 33: Evans, D. S. (1987), ‘The relatio
Page 34 and 35: Nishimura, K. G., T. Nakajima, and
Page 36 and 37: Table 1: Summary statistics for the
Page 38 and 39: Table 3: The definitions of indepen
Page 40: Table 5: Estimation results Forms o

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