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Falck, Oliver; Guenther, Christina; Heblich, Stephan; Kerr, William R. (2013): From Russia with love: The impact of relocated firms on incumbent survival. In: Journal of Economic Geography, Vol. 13, No. 3: pp. 419-449

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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.

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