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From Russia with Love: The Impact of Relocated Firms on Incumbent Survival

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Author Info

  • Oliver Falck

    ()
    (Ifo Institute for Economic Research at the University of Munich)

  • Christina Guenther

    ()
    (Max Planck Institute of Economics, Evolutionary Economics Group
    WHU- Otto Beisheim School of Management)

  • Stephan Heblich

    ()
    (Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group)

  • William R. Kerr

    ()
    (Harvard Business School, Entrepreneurial Management Unit)

Abstract

We identify the impact of local firm concentration on incumbent performance with a quasi natural experiment. When Germany was divided after World War II, many firms in the machine tool industry fled the Soviet occupied zone to prevent expropriation. We show that the regional location decisions of these firms upon moving to western Germany were driven by non-economic factors and heuristics rather than existing industrial conditions. Relocating firms increased the likelihood of incumbent failure in destination regions, a pattern that differs sharply from new entrants. We further provide evidence that these effects are due to increased competition for local resources.

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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 10-112.

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Length: 36 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:hbs:wpaper:10-112

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Keywords: Agglomeration; competition; firm dynamics; labor; Germany;

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References

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Citations

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Cited by:
  1. Martin Obschonka & Eva Schmitt-Rodermund & Rainer K. Silbereisen & Samuel D. Gosling & Jeff Potter, 2013. "The Regional Distribution and Correlates of an Entrepreneurship-Prone Personality Profile in the United States, Germany, and the United Kingdom: A Socioecological Perspective," SOEPpapers on Multidisciplinary Panel Data Research 550, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Ludger Wößmann, 2011. "Die Bedeutung von Bildung für die Wirtschaftsentwicklung: Eine neue wirtschaftshistorische Forschungsagenda anhand preußischer Kreisdaten, Teil 2," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(01), pages 41-47, 01.
  3. Aaron Chatterji & Edward L. Glaeser & William R. Kerr, 2013. "Clusters of Entrepreneurship and Innovation," NBER Working Papers 19013, National Bureau of Economic Research, Inc.
  4. Ghani, Ejaz & Kerr, William R. & O'Connell, Stephen D., 2013. "Input usage and productivity in Indian manufacturing plants," Policy Research Working Paper Series 6656, The World Bank.

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