Do agglomeration externalities affect firm survival?

Abstract

Do agglomeration externalities affect firm survival? Regional Studies. This paper analyses the impact of spatial agglomeration externalities on Italian start-up firms’ survival. Italy represents a relevant case study given the well-known role of firm clusters in the country's economic development. Results obtained support the hypothesis that industry variety reduces the likelihood of firm exit. Specifically, related variety, which contributes to the generation and diffusion of new knowledge, has a positive effect on firm survival in manufacturing sectors, while unrelated variety, which may work as a portfolio strategy, plays a positive role in services sectors. Localization economies positively influence firm survival only in services sectors. Finally, urban density is not robust to the control for firm characteristics.

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