Vanishing of Risk Factors for the Success and Survival of Newly Founded Companies

The success of a newly founded company or small business depends on
various initial risk factors or staring conditions, respectively,
like e.g. the market the business aims for, the experience and the
age of the founder, the preparation prior to the launch, the
financial frame, the legal basis of the company and many others.
These risk factors determine the chance of survival for the venture
in the market. However, the effects of these risk factors often
change with time. They may vanish or even increase with the time
the company is in the market. In this paper we analyse the survival
of 1123 newly founded companies in the state of Bavaria, Germany.
Our focus is thereby primarily on the investigation of
time-variation of the initial factors for success. The
time-variation is thereby tackled within the framework of varying
coefficient models, as introduced by Hastei and Tibshirani (1993,
J.R.S.S. B.), where time modifies the effects of risk factors. An
important issue in our analysis is the separation of risk factors
which have time-varying effects from those which have time-constant
effects. We make use of the Akaike criterion to separate these two
types of factors.