Business analysts remain divided over the reasons behind the declining average lifespan of publicly traded companies. In 1960, companies had a 50% chance of lasting at least twenty years and an 80% chance of lasting at least ten years. In contrast, companies founded in 2000 had only a 50% chance of companies lasting at least 10 years. Some business analysts point to structural changes in the economy to explain this change. As larger, older businesses failed because of recessions or changing consumer tastes, the market was left open to an influx of smaller companies. However, these businesses were left with a host of problems, such as lack of institutional knowledge, which led to uncertainty and decreased the probability of company survival. Further, the removal of once-stable forces within the marketplace led to instability that made it more difficult for newer companies to survive for more than a few years past their initial public offerings.
A growing number of analysts, however, contend that modern companies are purposefully built to encourage shorter business lifespans. They explain this trend in the context of the growing belief that certain businesses should be “built for acquisition.” Such businesses, they maintain, are built to last only until the product the company produces proves to be a success. Once the product or technology is successful, larger companies acquire the technology and the start up dissolves. This theory is built on the belief that many modern start-ups tend to be centered around a single technology or suite of technologies rather than their long term uses.