The spillover and crowding-out framework for high-growth firms and regional firm entry and exit dynamics

A framework to explain how regional high-growth firm (HGF) prevalence is associated with regional firm entry and exit is developed. Two opposing arguments are produced and labelled the crowding-out and spillover arguments. The former suggests HGFs reduce entries and increase exits, while the latter predicts the opposite. Using a panel dataset of 35 Austrian NUTS-3 regions from the period 2008–19, we empirically examine our framework using pooled fixed effects and negative binomial regressions. Results show the spillover argument explains firm entry, while the crowding-out argument explains firm exit. HGF-rich regions may require tailored policy to mitigate greater firm exits.