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

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  • Michael Fritsch

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

  • Javier Changoluisa

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

Abstract

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.

Suggested Citation

  • Michael Fritsch & Javier Changoluisa, 2014. "New Business Formation and the Productivity of Manufacturing Incumbents: Effects and Mechanisms," Jena Economics Research Papers 2014-025, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2014-025
    DOI: 10.1016/j.jbusvent.2017.01.004
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    More about this item

    Keywords

    New business formation; productivity; incumbent firms;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D20 - Microeconomics - - Production and Organizations - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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