Are all startups affected similarly by clusters? Agglomeration, competition, firm heterogeneity, and survival

Are all startups similarly affected by the survival benefits and drawbacks of locating in geographic clusters? In this paper, we argue that prior theorizing may have missed important contingencies that affect whether a startup experiences the benefits and costs of locating in a cluster. In particular, while the local levels of skilled labor, suppliers, and purchasers have a beneficial influence and local competition has a detrimental influence on startup survival, these relationships are moderated by heterogeneity in firms' resources and capabilities. We find support for these arguments using a dataset covering the early life of all independent startups in the Canadian manufacturing sector from 1984 to 1998.

► Survival benefits and drawbacks of clusters do not affect all startups equally. ► High levels of specialized labor, suppliers, and purchasers reduce failure. ► High levels of local competition increase the likelihood of failure. ► Above-average resources weaken the benefits and drawbacks of clusters. ► Above-average capabilities strengthen the benefits and weaken the drawbacks of clusters.