48 Pages Posted: 22 Jun 2010 Last revised: 16 Oct 2012
Date Written: July 1, 2012
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.
Keywords: Agglomeration, competition, firm dynamics, labor, Germany
JEL Classification: R10, L10, H25, O10, J20
Suggested Citation: 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: https://ssrn.com/abstract=1628104 or http://dx.doi.org/10.2139/ssrn.1628104