Firm strategy and age dependence: a contingent view of the liabilities of newness, adolescence, and obsolescence. Administrative Science Quarterly, June, 1999 by Andrew D. Henderson
How does firm performance vary with age? Organizational ecologists have addressed this question, primarily in terms of failure rates. Their research has used several labels to describe the relationship between age and failure, including (1) the liability of newness (Stinchcombe, 1965; Hannan and Freeman, 1984), (2) the liability of adolescence (Levinthal and Fichman, 1988; Bruderl and Schussler, 1990), and (3) the liability of obsolescence (Baum, 1989; Ingram, 1993; Barron, West, and Hannan, 1994). A liability of newness suggests that selection processes favor older, more reliable organizations, so failure rates are expected to decrease monotonically with age (Freeman, Carroll, and Hannan, 1983; Hannan and Freeman, 1984). Liability of adolescence arguments suggest that organizations can survive for a time with little risk of failure because they can draw on the initial stock of assets they typically acquire at founding, so failure rates are predicted to have an inverted, U-shaped relationship with age (Bruderl and Schussler, 1990; Fichman and Levinthal, 1991). The liability of obsolescence argument is that firms are highly inertial and tend to become increasingly misaligned with their environments. Consequently, failure rates are expected to increase with age (Baum, 1989; Ingram, 1993; Barron, West, and Hannan, 1994).
