IDEAS home Printed from https://ideas.repec.org/a/kap/revind/v56y2020i1d10.1007_s11151-019-09699-1.html
   My bibliography  Save this article

New Business Formation and Incumbents’ Perception of Competitive Pressure

Author

Listed:
  • Javier Changoluisa

    (Friedrich Schiller University Jena
    Universidad Espíritu Santo)

  • Michael Fritsch

    (Friedrich Schiller University Jena)

Abstract

We investigate the relationship between new business formation and the level of competitive pressure that is perceived by manufacturing incumbent establishments. The perceived pressure of competition is stronger when entry in the respective industry is higher. This relationship holds not only for start-ups that are located in the same region of the incumbent, but also for start-ups across all regions of Germany. Additionally, we find that particularly small, low-productivity incumbents—as well as incumbents that are located in highly populated regions—are more likely to associate new business formation with high levels of competitive pressure. We also identify other incumbent characteristics that influence the overall level of perceived competitive pressure.

Suggested Citation

  • Javier Changoluisa & Michael Fritsch, 2020. "New Business Formation and Incumbents’ Perception of Competitive Pressure," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(1), pages 165-197, February.
  • Handle: RePEc:kap:revind:v:56:y:2020:i:1:d:10.1007_s11151-019-09699-1
    DOI: 10.1007/s11151-019-09699-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11151-019-09699-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s11151-019-09699-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, July.
    2. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    3. Anja Spengler, 2008. "European Data Watch: The Establishment History Panel," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 128(3), pages 501-509.
    4. Fernando Borraz & Juan Dubra & Daniel Ferrés & Leandro Zipitría, 2014. "Supermarket Entry and the Survival of Small Stores," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(1), pages 73-93, February.
    5. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," Post-Print halshs-01599618, HAL.
    6. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 536-598, June.
    7. Czarnitzki, Dirk & Etro, Federico Gabriele & Kraft, Kornelius, 2008. "The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence," ZEW Discussion Papers 08-078, ZEW - Leibniz Centre for European Economic Research.
    8. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    9. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    10. Michael Fritsch & Florian Noseleit, 2013. "Investigating the anatomy of the employment effect of new business formation," Cambridge Journal of Economics, Oxford University Press, vol. 37(2), pages 349-377.
    11. Schutjens, Veronique & Stam, Erik, 2003. "The Evolution and Nature of Young Firm Networks: A Longitudinal Perspective," Small Business Economics, Springer, vol. 21(2), pages 115-134, September.
    12. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-181.
    13. Fritsch, Michael & Changoluisa, Javier, 2017. "New business formation and the productivity of manufacturing incumbents: Effects and mechanisms," Journal of Business Venturing, Elsevier, vol. 32(3), pages 237-259.
    14. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
    15. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2004. "Entry and Productivity Growth: Evidence from Microlevel Panel Data," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 265-276, 04/05.
    16. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    17. Maria Bramati & Alberto Gaggero & Edna Solomon, 2015. "International Trade and Domestic Competition: Evidence from Belgium," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(4), pages 383-399, June.
    18. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2005. "The Effect of Financial Development on Convergence: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 173-222.
    19. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
    20. Franz Kronthaler, 2005. "Economic capability of East German regions: Results of a cluster analysis," Regional Studies, Taylor & Francis Journals, vol. 39(6), pages 739-750.
    21. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    22. Eric A. Nerlinger & Franz-Josef Bade, 2000. "The spatial distribution of new technology-based firms: Empirical results for West-Germany," Papers in Regional Science, Springer;Regional Science Association International, vol. 79(2), pages 155-176.
    23. Hethey, Tanja & Schmieder, Johannes F., 2010. "Using worker flows in the analysis of establishment turnover : evidence from German administrative data," FDZ Methodenreport 201006_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    24. Joachim Wagner, 2016. "International Trade and Firm Performance: A Survey of Empirical Studies since 2006," World Scientific Book Chapters, in: Microeconometrics of International Trade, chapter 2, pages 43-87, World Scientific Publishing Co. Pte. Ltd..
    25. Callejon, Maria & Segarra, Agusti, 1999. "Business Dynamics and Efficiency in Industries and Regions: The Case of Spain," Small Business Economics, Springer, vol. 13(4), pages 253-271, December.
    26. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    27. Niels Bosma & Erik Stam & Veronique Schutjens, 2011. "Creative destruction and regional productivity growth: evidence from the Dutch manufacturing and services industries," Small Business Economics, Springer, vol. 36(4), pages 401-418, May.
    28. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    29. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," Small Business Economics, Springer, vol. 48(1), pages 9-24, January.
    30. Tang, Jianmin, 2006. "Competition and innovation behaviour," Research Policy, Elsevier, vol. 35(1), pages 68-82, February.
    31. Martin Andersson & Pontus Braunerhjelm & Per Thulin, 2012. "Creative destruction and productivity: entrepreneurship by type, sector and sequence," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing, vol. 1(2), pages 125-146, October.
    32. Philippe Aghion & Evguenia Bessonova, 2006. "On Entry and Growth: Theory and Evidence," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 259-278.
    33. Olof Ejermo, 2005. "Technological Diversity and Jacobs’ Externality Hypothesis Revisited," Growth and Change, Wiley Blackwell, vol. 36(2), pages 167-195, June.
    34. Stephen J. Redding, 2011. "Theories of Heterogeneous Firms and Trade," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 77-105, September.
    35. Philippe Aghion, 2017. "Entrepreneurship and growth: lessons from an intellectual journey," PSE-Ecole d'économie de Paris (Postprint) halshs-01599618, HAL.
    36. Helsley, Robert W. & Strange, William C., 2011. "Entrepreneurs and cities: Complexity, thickness and balance," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 550-559.
    37. William J. Baumol, 2004. "Entrepreneurial Enterprises, Large Established Firms and Other Components of the Free-Market Growth Machine," Small Business Economics, Springer, vol. 23(1), pages 9-21, August.
    38. Audretsch, David B. & Fritsch, Michael, 1993. "A Note on the Measurement of Entry Rates," Freiberg Working Papers 1993/05, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    39. Iacovone, Leonardo, 2012. "The better you are the stronger it makes you: Evidence on the asymmetric impact of liberalization," Journal of Development Economics, Elsevier, vol. 99(2), pages 474-485.
    40. Mitsuru Igami, 2011. "Does Big Drive Out Small?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(1), pages 1-21, January.
    41. Udo Brixy, 2014. "The Significance of Entry and Exit for Regional Productivity Growth," Regional Studies, Taylor & Francis Journals, vol. 48(6), pages 1051-1070, June.
    42. Matthew S. Bothner, 2005. "Relative size and firm growth in the global computer industry," Industrial and Corporate Change, Oxford University Press, vol. 14(4), pages 617-638, August.
    43. repec:iab:iabfme:201006(en is not listed on IDEAS
    44. Michael Fritsch & Ronney Aamoucke, 2013. "Regional public research, higher education, and innovative start-ups: an empirical investigation," Small Business Economics, Springer, vol. 41(4), pages 865-885, December.
    45. Braha, Dan & Stacey, Blake & Bar-Yam, Yaneer, 2011. "Corporate competition: A self-organized network," MPRA Paper 32142, University Library of Munich, Germany.
    46. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
    47. Ron Kemp & Jurgen Hanemaaijer, 2004. "Perception of competition : A measurement of competition from the perspective of the firm," Scales Research Reports H200406, EIM Business and Policy Research.
    48. Sabine Biege & Gunter Lay & Christoph Zanker & Thomas Schmall, 2013. "Challenges of measuring service productivity in innovative, knowledge-intensive business services," The Service Industries Journal, Taylor & Francis Journals, vol. 33(3-4), pages 378-391, February.
    49. Michael Fritsch & Florian Noseleit, 2013. "Start-ups, long- and short-term survivors, and their contribution to employment growth," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 719-733, September.
    50. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    51. Koen Frenken & Frank Van Oort & Thijs Verburg, 2007. "Related Variety, Unrelated Variety and Regional Economic Growth," Regional Studies, Taylor & Francis Journals, vol. 41(5), pages 685-697.
    52. Michael Fritsch (ed.), 2011. "Handbook of Research on Entrepreneurship and Regional Development," Books, Edward Elgar Publishing, number 13399.
    53. Yvonne Schindele & Antje Weyh, 2011. "The direct employment effects of new businesses in Germany revisited: an empirical investigation for 1976–2004," Small Business Economics, Springer, vol. 36(3), pages 353-363, April.
    54. Lucia Foster & John Haltiwanger & C. J. Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November.
    55. Hulten, Charles R., 2010. "Growth Accounting," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 987-1031, Elsevier.
    56. Spengler, Anja, 2008. "The establishment history panel 1975-2005 : handbook version 2.0.0," FDZ Datenreport. Documentation on Labour Market Data 200704_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fritsch, Michael & Changoluisa, Javier, 2017. "New business formation and the productivity of manufacturing incumbents: Effects and mechanisms," Journal of Business Venturing, Elsevier, vol. 32(3), pages 237-259.
    2. Michael Fritsch & Florian Noseleit, 2013. "Indirect employment effects of new business formation across regions: The role of local market conditions," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 361-382, June.
    3. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
    4. Michael Fritsch, 2011. "The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research," Jena Economic Research Papers 2011-006, Friedrich-Schiller-University Jena.
    5. Michael Fritsch & Alexandra Schroeter, 2011. "Why does the effect of new business formation differ across regions?," Small Business Economics, Springer, vol. 36(4), pages 383-400, May.
    6. Michael Fritsch, 2012. "Methods of analyzing the relationship between new business formation and regional development," Jena Economic Research Papers 2012-064, Friedrich-Schiller-University Jena.
    7. repec:elg:eechap:14395_15 is not listed on IDEAS
    8. Michael Fritsch & Florian Noseleit, 2013. "Start-ups, long- and short-term survivors, and their contribution to employment growth," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 719-733, September.
    9. Braunerhjelm, Pontus, 2010. "Entrepreneurship, Innovation and Economic Growth - past experience, current knowledge and policy implications," Working Paper Series in Economics and Institutions of Innovation 224, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    10. Diekhof, Josefine & Cantner, Uwe, 2017. "Incumbents' responses to innovative entrants: A multi-country dynamic analysis," ZEW Discussion Papers 17-052, ZEW - Leibniz Centre for European Economic Research.
    11. Michael Fritsch & Sandra Kublina, 2019. "Persistence and change of regional new business formation in the national league table," Journal of Evolutionary Economics, Springer, vol. 29(3), pages 891-917, July.
    12. Javier Changoluisa, 2021. "The early development of new establishments: An evaluation of the role of spatial selection and agglomeration," Jena Economic Research Papers 2021-009, Friedrich-Schiller-University Jena.
    13. Dienes, Christian & Schneck, Stefan & Wolter, Hans-Jürgen, 2018. "Die Auswirkungen des Gründungsgeschehens auf das regionale Wirtschaftswachstum," IfM-Materialien 270, Institut für Mittelstandsforschung (IfM) Bonn.
    14. Tijl Hendrich & Jennifer Olsen & Judith Bayer, 2022. "Entries and Regional Growth: The Role of Relatedness," CPB Discussion Paper 433, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Uwe Cantner & Josefine Diekhof, 2017. "Incumbents' Asymmetric Responses to Environmentally Friendly Entrants in the Automotive Industry," Jena Economic Research Papers 2017-004, Friedrich-Schiller-University Jena, revised 13 Jul 2017.
    16. Aghion, Philippe & Akcigit, Ufuk & Howitt, Peter, 2014. "What Do We Learn From Schumpeterian Growth Theory?," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 515-563, Elsevier.
    17. Viktoria Kocsis & Victoria Shestalova & Henry van der Wiel & Nick Zubanov & Ruslan Lukach & Bert Minne, 2009. "Relation entry, exit and productivity: an overview of recent theoretical and empirical literature," CPB Document 180, CPB Netherlands Bureau for Economic Policy Analysis.
    18. Michael Fritsch & Florian Noseleit, 2009. "Start-ups, Long- and Short-Term Survivors and their Effect on Regional Employment Growth," Jena Economic Research Papers 2009-081, Friedrich-Schiller-University Jena.
    19. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2013. "Do Product Market Regulations In Upstream Sectors Curb Productivity Growth? Panel Data Evidence For OECD Countries," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1750-1768, December.
    20. Frank Oort & Niels Bosma, 2013. "Agglomeration economies, inventors and entrepreneurs as engines of European regional economic development," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 213-244, August.
    21. Félix Modrego & Philip McCann & William Foster & M. Olfert, 2015. "Regional entrepreneurship and innovation in Chile: a knowledge matching approach," Small Business Economics, Springer, vol. 44(3), pages 685-703, March.

    More about this item

    Keywords

    New business formation; Competitive pressure; Regional competition; Incumbent firms; Manufacturing industries;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:revind:v:56:y:2020:i:1:d:10.1007_s11151-019-09699-1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.