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Does Goliath Help David? Anchor Firms and Startup Clusters

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  • Rahul R. Gupta

Abstract

This paper investigates the effects of a large firm’s geographical expansion (anchor firm) on local worker transitions into young firms through wage effects in industries economically proximate to the anchor firm. Using hand-collected data matched to administrative Census microdata, I exploit anchor firms’ site selection processes to employ a difference-in-differences approach to compare workers in winning counties to those in counterfactual counties. The arrival of an anchor firm induces worker reallocation towards young firms in industries linked through input-output channels by a magnitude of 120 new businesses that account for approximately 2,300 jobs. Consistent with the literature in personnel and organizational economics, incumbent firms experiencing the fastest wage growth due to these shocks shed mid-layer employees who select into young firms within the county and in their own industry of experience. These effects are strongest in the most specialized and knowledge-intensive industries. Attracting an anchor firm to a county appears to have limited spillover effects in overall employment that are mainly driven by reorganization of incumbent firms in the anchor’s input-output industries that face rising labor costs.

Suggested Citation

  • Rahul R. Gupta, 2020. "Does Goliath Help David? Anchor Firms and Startup Clusters," Working Papers 20-17, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:20-17
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    File URL: https://www2.census.gov/ces/wp/2020/CES-WP-20-17.pdf
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