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Duration in the digital economy

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2 Author(s)
R. J. Kauffman ; Carlson Sch. of Manage., Minnesota Univ., Minneapolis, MN, USA ; Bin Wang

We examine the drivers of Internet firm survival using a multi-method survival analysis. Based on previous literature on business failure and recent IS research on e-commerce business models, we test the impact of sector-, firm- and e-commerce-specific factors on an Internet firm duration after its IPO. We first provide a descriptive analysis of Internet firm survival using non-parametric survival analysis, which indicates the existence of differences in exit timing for different e-commerce firms. We next explore the relative strengths of the explanatory factors in predicting different outcomes using semi-parametric survival analyses. Our results suggest that the impact of the sector-, firm- and e-commerce-specific factors are different for different outcomes such as bankruptcy, merger and acquisition. A favorable capital market, reflected in a high IPO entry rate, and the selling of digital goods can enhance an Internet firm's chances of survival. One limitation of our research is the generalizability of the results since the Internet sector is still in its early stage of development and we only include publicly-traded Internet firms in our data analysis. In addition, results from our semi-parametric analyses might not apply to publicly-traded B2B firms, which are not included since there were no observations of bankruptcies, mergers and acquisitions.

Published in:

System Sciences, 2003. Proceedings of the 36th Annual Hawaii International Conference on

Date of Conference:

6-9 Jan. 2003