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ABSTRACT: The Determinants of Survival of De Novo Entrants in Clusters and Dispersal

Aviad Pe'er, Tuck School of Business at Dartmouth
Ilan Vertinsky, Sauder School of Business, The University of British Columbia

October 2006

We analyze the determinants of de novo entrants in clusters and dispersal. We posit a theoretical framework which articulates the differences in strategic advantages and threats that locating in clusters or dispersal pose to de novo entrants and the firm specific characteristics that are likely as a consequence to increase the chance of survival in each location type. We test our hypotheses using a database containing de novo entrants in the Canadian manufacturing sectors between 1984-1998. We found that size, maturity and higher quality of human capital have higher survival values in more dispersed locations. Moderate growth is found to be more beneficial to firms in dispersal, while overly rapid growth poses a higher danger to the survival of dispersed firms compared to those in clusters. We also found that the adolescence period is extended in clusters.

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