Publicly traded companies die off at the same rate regardless of their age or economic sector, by scientists at the Santa Fe Institute in New Mexico reveals.
Economists call the phenomenon the mortality rate of a firm – the time it has before it is bought, merged with another company, or goes out of business completely.
“It doesn’t matter if you’re selling bananas, airplanes, or whatever,” says Marcus Hamilton, an SFI postdoctoral fellow and corresponding author of a new paper published in the journal Royal Society Interface.
The team estimated that the typical company lasts about 10 years.
The researchers came to their conclusion after studying data from Standard and Poor’s Compustat, with information on publicly traded companies dating back to 1950.
“The next question is, why might that be?” Hamilton says. The new paper largely avoids engaging with any particular economic model, although the researchers have some hypotheses inspired by ecological systems, where plants and animals have their own internal dynamics but must also compete for scarce resources – just like businesses do.
Read science facts, not fiction...
There’s never been a more important time to explain the facts, cherish evidence-based knowledge and to showcase the latest scientific, technological and engineering breakthroughs. Cosmos is published by The Royal Institution of Australia, a charity dedicated to connecting people with the world of science. Financial contributions, however big or small, help us provide access to trusted science information at a time when the world needs it most. Please support us by making a donation or purchasing a subscription today.