Abstract
ABSTRACT We study the emergence of a new population of firms and show that legitimation is a local phenomenon and stimulates entry. However, legitimation is offset by competition as the number of firms increases. We provide evidence that the legitimation and competition effects within the municipality dominate the effects in a larger area. We also give a methodological contribution and show that the magnitude of the legitimation and competition effects is weaker than what is predicted by the conventional regressions. Finally, legitimation and competition do not act ‘symmetrically’: legitimation is stronger and acts more quickly than the competitive effect.
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