Exit and Firm Boundaries after an Industry Shock

Abstract

We examine asset closure and deployment decisions using a natural experiment in industrial fishing that exogenously decreased the intensity of competition and changed firm incentives to close and deploy assets. After this industry shock, ship exit significantly increased, especially among larger firms. Controlling for capacity, ships with lower extraction capacity than other ships within the same firm showed a greater tendency to exit. Furthermore, the remaining ships shifted towards a more deliberate strategic deployment, consistent with an increase in efficiency due to less competition.