Let’ s shift slightly our point of you from the active companies of the video-game industry, towards the inactive set. The set consists of all companies that “exited” the industry between 2009 and 2014. Companies that got dissolved, liquidated or are inactive are included in the sample. Once more we examine the geographic distribution of the companies, and explore potential factors that affect the survivability expectancy of the companies.
The distribution of the companies is uneven within the country, allowing us to observe the emergence of certain clusters. Naturally, bigger sized clusters seem to have strong effect on predicting the exit rate of companies. Although it is premature to establish any causality, because of the potential relationship between the population of a given cluster and a company’s exit probability.
For that reason, we have employed the age as a proxy in order to evaluate the effect of geographic factors and type of the company to its life expectancy. However, in theory, age could be employed as a factorial variable that affect survivability. In a sense, the older the company, the higher the survivability (the relationship is not linear). This phenomenon is described as “the liability of newness’’. A second factor that we explored, is the effect of the management team size (dark colour of circle in the second figure), which has also been found to have a positive effect on the company’s survivability, albeit not as strong as the age.
In our case, we explored the distribution of inactive companies in terms of age (circle size in the second figure). The vast majority of companies that exited the industry during the past six years were young companies that did not exceed the 7th year of their economic life. At this point one could wonder if by combining age and geography could result in better insights towards the industry’ s profiling process. Indeed, taking London as an example, the age threshold that a company has to exceed in order for its survivability to begin increasing is 4.41 years, compared to the national average of 5.29, indicating higher survivability of companies located in the metropolitan area.