| Friends or Foes: The Spatial Dynamic Between Established Firms and Entrants |
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New entrants in local economies at first harm, then help, already existing firms, according to a working paper today by the Office of Advocacy of the U.S. Small Business Administration. The paper examines how the entrance of new establishments within a 150-mile radius of young firms affects the existing firms’ profitability. The working paper, Friends or Foes: The Spatial Dynamic Between Established Firms and Entrants, written by Lawrence Plummer with funding from the Office of Advocacy, examines whether new establishments harm existing firms’ profitability due to increased competition, or help increase profits due to positive spillover effects. The paper discovers that the effect of new entrants is not an either/or proposition. In the first year of entry, the effect on existing firms’ financial performance (return on assets) is negative. However, after three years the effect on performance reverses and becomes positive. A copy of this study is located at http://www.sba.gov/advo/research/rs293tot.pdf, and the research summary is available at: http://www.sba.gov/advo/research/rs293.pdf . Should you need further information, please feel free to contact Brian Headd at (202) 205-6533 or advocacy@sba.gov. |
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