How do Large Companies Affect Entrepreneurship: Evidence From Amazon’s HQ2 Search

58 Pages Posted: 14 Nov 2018 Last revised: 20 Nov 2019

See all articles by Zhao Jin

Zhao Jin

University of Rochester - Simon Business School

Date Written: November 14, 2019

Abstract

I identify a specific channel (the prospect of getting funded or acquired by large firms) through which entrepreneurship is affected. By exploiting the variation across entrepreneurs' reactions to the two announcements of Amazon's new headquarters (HQ2) search, I find that after the announcement of the 20 finalist cities, new startups that are the potential funding or acquisition targets of Amazon are more likely to be established in one of those 20 cities. After the winning cities were selected, the newly created potential targets of Amazon are more likely to be founded only in the winning cities but not in the losing finalist cities. I also find that there exists a local competition for startups to get funded or acquired by Amazon, which is inconsistent with agglomeration explanation. I present evidence consistent with two possible underlying mechanisms: the synergy benefits from selling out to large firms and the difficulty in obtaining early-stage funding from non-corporate investors.

Keywords: Large Companies, Entrepreneurial Entry, Amazon HQ2, Acquisition, Startup Financing

JEL Classification: G34, M13

Suggested Citation

Jin, Zhao, How do Large Companies Affect Entrepreneurship: Evidence From Amazon’s HQ2 Search (November 14, 2019). Available at SSRN: https://ssrn.com/abstract=3280715 or http://dx.doi.org/10.2139/ssrn.3280715

Zhao Jin (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY
United States

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