Spatial concentration of industries and new firm exits: does this relationship differ between exits by failure and by M&As?

08-06-2012 | Publication

This study shows that the effect of the spatial concentration of industries on the post-entry hazards of new firms differs between types of exit and industry. New firms located in regions with a higher relative concentration of firms in the same industry are less likely to exit through termination of their activities than through mergers and acquisitions (M&A).

New firms in manufacturing seem to benefit from localisation economies because these firms are more likely to survive or exit successfully through M&A if they are located in a region with a higher concentration of similar activities. New firms in business services, in contrast, experience increasing competition from new entrants, thus lowering the likelihood of survival or of exiting through M&A.