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From Russia with love: The impact of relocated firms on incumbent survival

  • Falck, Oliver
  • Guenther, Christina
  • Heblich, Stephan
  • Kerr, William R.

We identify the impact of local firm concentration on incumbent performance in a historic setting that has quasi-experimental characteristics. 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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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20507.

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Date of creation: 2013
Date of revision:
Publication status: Published in Journal of Economic Geography 3 13(2013): pp. 419-449
Handle: RePEc:lmu:muenar:20507
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