Firm exits as a determinant of new entry: Is there evidence of local creative destruction?

Aviad Pe'er, Ilan Vertinsky

Research output: Contribution to journalArticlepeer-review

69 Scopus citations

Abstract

This study posits that a local process of creative destruction provides an impetus to regional industrial renewal. We argue that exits of older firms release resources that stimulate local entry. New entrants add value to these resources by redeploying them in more productive uses. We test our hypotheses with a unique longitudinal database encompassing the entry and exit of Canadian manufacturing enterprises. We find that exits of old firms increase entry and that on average new entrants are more productive. Persistent high local rates of exit, however, deter entry.

Original languageEnglish (US)
Pages (from-to)280-306
Number of pages27
JournalJournal of Business Venturing
Volume23
Issue number3
DOIs
StatePublished - May 2008
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Management of Technology and Innovation

Keywords

  • Agglomeration
  • Entry
  • Exit
  • Local renewal

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