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

Citation

Falck O, Guenther C, Heblich S & Kerr WR (2013) From Russia with love: the impact of relocated firms on incumbent survival. Journal of Economic Geography, 13 (3), pp. 419-449. https://doi.org/10.1093/jeg/lbs035

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.

Keywords
Agglomeration; competition; firm dynamics; labor; Germany

Journal
Journal of Economic Geography: Volume 13, Issue 3