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

The Role of Regional Innovation Systems (RIS) in Translating R&D Investments into Economic and Employment Growth

“…Demand Sophistication affects the ability of a given region to grow or increase its Market Potential by attracting skilled, qualified, creative and productive human capital that can develop, design and produce more and better products or services at competitive prices. In this sense, the results are congruent with previous findings of Gilbert, B., McDougall, P., Audretsch, D. (2008), Norman (2002, Pe'er and Vertinsky (2008), Pires (2005) and Teixeira and Fortuna (2010), suggesting that Market Potential has a double-role: (1) Assuring demand: generating economies of scale that can assure the necessary levels of demand for the products and services produced, assembled, distributed or sold within regional boundaries to achieve attractive levels of remuneration for productive factors (i.e., capital and labour), stimulating FDI and formation of a medium-technology manufacturing base;…”

“…Regions characterised by higher R&D investment also tend to experience greater knowledge spillover (e.g., Audretsch and Lehmann, 2005), and venture sustainability is influenced not only by traditional economic factors, such as market potential (e.g., Pires, 2005) or demand sophistication (e.g., Buesa, M., Heijs, J., Baumert, T., 2010; Lindic, J., Bavdaz, M., Kovacic, H., 2012), but also by the opportunity to access the knowledge and technology generated by surrounding universities (Audretsch and Lehmann, 2005). Thus, the knowledge environment can be a source of regional competitive advantage (e.g., Fritsch, 2008;Pe'er and Vertinsky, 2008;Tappeiner, G., Hauser, C., Walde, J., 2008).…”

“…The second reason concerns the increasing pace of innovation associated with the shortening of technology and product life-cycles (Adner and Levinthal, 2001;Auerswald, 2010). This development appears to favour new entrants, in particular, the industry spin-offs and knowledge-based start-ups that have greater flexibility than established corporations in coping with decreasing time-to-market and other disruptive changes (Pe'er and Vertinsky, 2008). In light of the above considerations, the main purpose of this study is to fill in the gap between R&D efforts and the attainment of measurable, sustained and sustainable outcomes in terms of economic and employment growth.…”

Entrepreneurial exit and entrepreneurial engagement

“…Whereas these studies focus on the evolutionary process of firms and markets, the entrepreneurship literature focuses on persons and specific cases. For example, Pe'er and Vertinsky (2008) demonstrate that the exit of incumbents stimulates the entry of new, more productive enterprises in the same location. They can combine the resources (e.g., knowledge) that were released by exiting firms in new ways to increase productivity.…”

“…In the case that this entrepreneurial exit coincides with a firm exit, the entrepreneur is no longer engaged in the primary ownership and decision-making structure of the firm that has been closed. When a firm exits, resources are released that can be redeployed in new businesses (Pe'er and Vertinsky 2008;DeTienne 2010). The release of (entrepreneurial) human capital resources (as embedded within the entrepreneur that shut down, discontinued or quit the business) that results from an entrepreneurial exit may be redeployed in new or emerging, as well as in existing, entrepreneurial initiatives.…”