Productivity and Its Impacts on the Survival of New Firms in Iranian Manufacturing Industries

Despite the fact that productivity has long been studied in economic literature، only in recent years it has been considered as the important issue in the Iranian economy and the Fourth Development Plan could be considered as a turning point on looking at it. Based on the Plan، one third of economic growth should come from the productivity improvement so; it is expected to see the results of productivity growth on the performance of economy and the firms. This study aims to examine the impacts of total factor productivity and labor productivity on the survival of new firms in Iranian manufacturing industries. Data of this study comes from the censuses taken by the Statistical Center of Iran in 2000، 2001 and 2002. The firms were divided into two categories of survived and exited firms. Using the Cox hazard model، the impact of productivity on their survival probability has been examined. Contrary to expectation، the results of this paper indicate that total factor productivity does not show a significant positive impact on survival probability of these firms. However، increase in labor productivity significantly increases the survival of new firms. This finding means that labor productivity، which can be considered as a manifestation of human capital in each firm، is very important for the survival of firm، especially in the first year of entry.