Don't Stand So Close to Me: Foreign and Domestic Incumbents and New Business Births

Abstract

We examine the spatial pattern of agglomeration effects on firm births, distinguishing between domestic and foreign ownership among incumbent firms. Using data from Polish municipalities, our analysis considers both domestic and foreign firm births, capturing neighbourhood effects with spatial lags. We argue that the spatial pattern of agglomeration effects results from a combination of competition for resources and positive externalities, where the latter are mostly associated with foreign incumbents. We find that foreign incumbents in the neighbourhood have a stronger positive association with firm births than those in the focal municipality; in contrast, the reverse pattern applies to domestic incumbents.