Explanations of firm survival in renewable energy in the United States: a study of ethanol refineries

Firm survival is key in understanding the evolution of industries and the larger economy. Although exit and entry are common occurrences during an industry’s life cycle, it is not always easy to predict who will survive. Literature suggests a range of factors, both internal and external to the firm, and corresponding measures as determinants of survival or exit. However, these measures do not directly explain firm-level strategies such as internal adjustments to external conditions. In this paper, we use the U.S. biofuel industry to examine firm survival. As a resource-based industry focused on process innovation, biofuel production attracted farmer-entrepreneurs and related-industry investors after policies mandates and subsidies generated a dedicated market for the fuel. Despite support, not all firms survived a period of industrial sorting that followed the 2007–2008 recession. This study shows that local connections/embeddedness, knowledge base and knowledge sharing, and entrepreneurial efforts were critical for firm survival in addition to age, capacity, ownership, and location.