How long will your company live?

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Starting today, how many years before the company you work for is bought out, merged or liquidated? There are books on the subject, all giving different ideas as to corporate longevity, and many, many academic papers. The world’s oldest company is Kongo-Gumi, a carpentry and construction business in Japan which has been going for 1400 years. Probably even IBM or Amazon won’t last that long.

A study published in the journal Royal Society Interface set out to answer the longevity question for publicly traded companies. The researchers went through Standard and Poor’s Compustat, an expansive database of information on publicly-traded companies dating back to 1950. Using a statistical technique called survival analysis, they discovered something no one had predicted: a firm’s mortality rate—its risk of dying in, say, the next year—had nothing to do with how long it had already been in business or what kinds of products it produced.

Though the number, of course, varies from firm to firm, the team estimated that the typical company lasts about ten years before it’s bought out, merges, or gets liquidated.

“The next question is, why that might be?” the researchers ask. The new paper largely avoids engaging with any particular economic model, though 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.

Fortinberry Murray began in 1983 so it has lasted way past the average—though it’s not a listed company, yet. We are aiming to best Kongo-Gumi.

By Dr Bob Murray

Link to article: HERE