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• Article | Journal of Economic Geography | May 2013

  From Russia with Love: The Impact of Relocated Firms on Incumbent Survival

  Oliver Falck, Christina Guenther, Stephan Heblich and William R. Kerr

  We identify the impact of local firm concentration on incumbent performance with a quasi-natural experiment. 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.

  Citation:

  Falck, Oliver, Christina Guenther, Stephan Heblich, and William R. Kerr. "From Russia with Love: The Impact of Relocated Firms on Incumbent Survival." Journal of Economic Geography 13, no. 3 (May 2013): 419–449.

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• Working Paper | HBS Working Paper Series | 2013

  Clusters of Entrepreneurship and Innovation

  Aaron K Chatterji, Edward Glaeser and William Kerr

  This paper reviews recent academic work on the spatial concentration of entrepreneurship and innovation in the United States. We discuss rationales for the agglomeration of these activities and the economic consequences of clusters. We identify and discuss policies that are being pursued in the United States to encourage local entrepreneurship and innovation. While arguments exist for and against policy support of entrepreneurial clusters, our understanding of what works and how it works is quite limited. The best path forward involves extensive experimentation and careful evaluation.

  Keywords: entrepreneurship; innovation; agglomeration; clusters; place making;

  Citation:

  Chatterji, Aaron K., Edward Glaeser, and William Kerr. "Clusters of Entrepreneurship and Innovation." Harvard Business School Working Paper, No. 13–090, April 2013. (NBER Working Paper Series, No. 19013, April 2013.)

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• Working Paper | HBS Working Paper Series | 2013

  Innovation, Reallocation and Growth

  Daron Acemoglu, Ufuk Akcigit, Nicholas Bloom and William R. Kerr

  We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type firms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry.

  Keywords: entry; Growth; industrial policy; innovation; R＆D; Reallocation; selection;

  Citation:

  Acemoglu, Daron, Ufuk Akcigit, Nicholas Bloom, and William R. Kerr. "Innovation, Reallocation and Growth." Harvard Business School Working Paper, No. 13–088, April 2013. (NBER Working Paper Series, No. 18993, April 2013.)

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