New KIBS on the bloc: the role of local manufacturing for start-up activity in knowledge-intensive business services

Abstract

ABSTRACT This study investigates the effect of local manufacturing on start-up activity across knowledge-intensive business services (KIBS) industries by relying on the natural experiment of German reunification. KIBS did not exist in the former socialist East Germany. The findings show that local manufacturing affected the co-location of new KIBS firms in East Germany while there was no such effect for West Germany, where the KIBS sector was already well established. The East German effect was fading over time when the KIBS sector became more established. The result suggests that strengthening the industrial base in peripheral regions could induce knowledge-intensive start-up activity.