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From Russia with Love: The Impact of Relocated Firms on Incumbent Survival


Oliver Falck


CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation

Christina Guenther


Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

Stephan Heblich


University of Stirling - Department of Economics

William R. Kerr


Harvard University - Entrepreneurial Management Unit

July 1, 2012

Harvard Business School Entrepreneurial Management Working Paper No. 10-112

Abstract:     
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.

Number of Pages in PDF File: 48

Keywords: Agglomeration, competition, firm dynamics, labor, Germany

JEL Classification: R10, L10, H25, O10, J20

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Date posted: June 22, 2010 ; Last revised: October 16, 2012

Suggested Citation

Falck, Oliver and Guenther, Christina and Heblich, Stephan and Kerr, William R., From Russia with Love: The Impact of Relocated Firms on Incumbent Survival (July 1, 2012). Harvard Business School Entrepreneurial Management Working Paper No. 10-112. Available at SSRN: http://ssrn.com/abstract=1628104 or http://dx.doi.org/10.2139/ssrn.1628104

Contact Information

Oliver Falck
CESifo (Center for Economic Studies and Ifo Institute) - Department Human Capital and Innovation ( email )
Poschingerstr. 5
Munich, 81679
Germany
Christina Guenther
Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )
Kahlaische Strasse 10
D-07745 Jena, 07745
Germany
Stephan Heblich
University of Stirling - Department of Economics ( email )
Stirling, Scotland FK9 4LA
United Kingdom
HOME PAGE: http://www.management.stir.ac.uk/people/economics/academic-staff/dr-stephan-heblich
William R. Kerr (Contact Author)
Harvard University - Entrepreneurial Management Unit ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
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