Abstract
Recent studies in evolutionary economic geography (EEG) highlight the key role of industry relatedness and cognitive proximity in boosting firm performance using data from developed countries. This paper explores the effect of industry relatedness on new firm survival in China by using a firm-level dataset for the 1999–2008 period. Based on survival models, it contributes to the ongoing debate by pointing out that new firms that are highly related to local industries have a lower failure rate, and the effect of industry relatedness is inflected by regional institutions and firm attributes. Industry relatedness occurs more effectively in the market-oriented regions but less effectively in regions with strong economic and political incentives of local governments.
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