A note on the relation between size, ownership status and plant’s closure: sunk costs vs. strategic size liability

In this paper we test both sunk cost and strategic size liability predictions by looking at the exit behavior of a sample of Italian manufacturing plants. For this purpose, we focus on plants’ size and ownership status. In particular, we distinguish independent plants from plants that belong to multi-unit organizations. As to these latter, we further distinguish State-owned from privately-owned plants. We also consider the impact upon the likelihood of closure of the size and nationality of the parent firm. In addition, and contrary to previous empirical work, data allow us to control for differences in the cost structure of plants. Namely, we use technology adoption dummies to take into account plants’ technological heterogeneity.