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Firm exits as a determinant of new entry: Is there evidence of local creative destruction?

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  • Pe'er, Aviad
  • Vertinsky, Ilan
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    Abstract

    This study posits that a local process of creative destruction provides an impetus to regional industrial renewal. We argue that exits of older firms release resources that stimulate local entry. New entrants add value to these resources by redeploying them in more productive uses. We test our hypotheses with a unique longitudinal database encompassing the entry and exit of Canadian manufacturing enterprises. We find that exits of old firms increase entry and that on average new entrants are more productive. Persistent high local rates of exit, however, deter entry.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 23 (2008)
    Issue (Month): 3 (May)
    Pages: 280-306

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    Handle: RePEc:eee:jbvent:v:23:y:2008:i:3:p:280-306

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    Web page: http://www.elsevier.com/locate/jbusvent

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    Cited by:
    1. Roy Thurik & Jolanda Hessels & Isabel Grilo & Peter van der Zwan, 2009. "Entrepreneurial exit and entrepreneurial engagement," Scales Research Reports, EIM Business and Policy Research H200910, EIM Business and Policy Research.
    2. Teemu Kautonen & Erno Tornikoski & Ewald Kibler, 2011. "Entrepreneurial intentions in the third age: the impact of perceived age norms," Small Business Economics, Springer, Springer, vol. 37(2), pages 219-234, September.
    3. Parker, Simon C., 2013. "Do serial entrepreneurs run successively better-performing businesses?," Journal of Business Venturing, Elsevier, Elsevier, vol. 28(5), pages 652-666.
    4. Bernd Ebersberger, 2011. "Public funding for innovation and the exit of firms," Journal of Evolutionary Economics, Springer, Springer, vol. 21(3), pages 519-543, August.
    5. Kan, Viktoriya, 2010. "Regional Determinants of New Firm Formation in a Transition Economy: The Case of Uzbekistan," PIE/CIS Discussion Paper, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University 490, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

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