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New firm survival: the interdependence between regional externalities and innovativeness

Author

Listed:
  • Tobias Ebert

    () (University of Mannheim)

  • Thomas Brenner

    () (Philipps-University of Marburg)

  • Udo Brixy

    () (Institute for Employment Research (IAB)
    Ludwig-Maximilians University)

Abstract

Abstract Many studies have shown that regional externalities play a crucial role for the survival prospects of newly founded companies. However, recent research provides evidence that not all businesses are affected by these externalities in the same way. Relying on new and representative panel survey data containing information about 6776 newly founded firms from almost all economic sectors in Germany, this paper suggests that the effects of regional externalities on survival are contingent upon the start-up’s innovative behavior. First, we show that introducing market novelties is not necessarily beneficial for newly founded firms and might even endanger their survival. Second, we find that being located in spatial proximity to similar firms is important for start-ups in non-high-tech environments and has a positive influence on survival only for less innovative companies. In contrast, high-tech start-ups are more likely to be affected by a diverse economic structure. We thus suggest that the recombination of knowledge from diverse sources can lead to overly complex innovation projects with detrimental effects on the start-up’s survival prospects.

Suggested Citation

  • Tobias Ebert & Thomas Brenner & Udo Brixy, 2019. "New firm survival: the interdependence between regional externalities and innovativeness," Small Business Economics, Springer, vol. 53(1), pages 287-309, June.
  • Handle: RePEc:kap:sbusec:v:53:y:2019:i:1:d:10.1007_s11187-018-0026-4
    DOI: 10.1007/s11187-018-0026-4
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    Keywords

    Firm survival; Innovation; Externalities;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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