This study explores the role of firm age as a mediating variable in the link between performance and the risk of terrorism. Theoretically, there can be vulnerabilities, liabilities or learning effects associated with age.
The empirical strategy uses randomness in the occurrence of successful terrorist incidents to estimate the hypothesized link in a sample of 1,600 Pakistani firms.
The results suggest a significant effect of terrorism for organizations lying beyond the 50th percentile of the age distribution. In addition to relevant controls – like size, ownership and location effects – the baseline results withstand alternative empirical specifications and the use of instrumental variables.
The study helps us understand the role of firm age in its performance, taking into account the presence of risks posed by weak law and order.
