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New Business Formation and the Productivity of Manufacturing Incumbents: Effects and Mechanisms

Listed author(s):
  • Michael Fritsch

    ()

    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Javier Changoluisa

    ()

    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

We analyze the effect of new business formation on the productivity of incumbent manufacturing establishments. We obtain robust empirical evidence of productivity improvements that are due to the emergence of new businesses in the same industry, that is, on the output market. This effect is spatially limited to the respective region. Regional competition from new businesses on the input market and cross-industry effects are not related to incumbents' productivity changes. The effect that new competition has on incumbents is moderated by an incumbent's distance from the technological frontier; incumbents close to the frontier exhibit a more pronounced positive reaction.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2014-025.

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Date of creation: 27 Oct 2014
Handle: RePEc:jrp:jrpwrp:2014-025
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