A Theoretical and Empirical Framework to Estimate the Impact of Conflict on the Economic Resilience of Clustered Firms in Ukraine

Abstract

In this thesis, I develop a theoretical and empirical framework to estimate whether participation in industrial clusters contributes to firm-level economic resilience to conflict-based shocks. Focusing on Ukraine following the full-scale Russian invasion in February 2022, the study situates industrial organization and firms’ resilience to conflict within a dynamic environment characterized by spatially heterogeneous exposure to conflict events and persistent institutional constraints. I document how Ukraine’s contemporary economic geography reflects the interaction of Soviet-era industrial path dependence, uneven post-transition institutional development, and conflict-induced reconfiguration, evaluating how these dynamics generate systematic variation in both firms’ baseline vulnerability and their exposure to shocks. I then survey the literature on cluster theory, network economics, and economic resilience. I argue that industrial clusters may mediate firm-level outcomes through multiple channels, including knowledge spillovers, input substitution, coordination mechanisms, and network-based shock propagation. Lastly, I propose an empirical strategy to test whether cluster membership is associated with greater resilience, defined in terms of firm performance outcomes such as sales, costs, and profitability. Leveraging panel data, the proposed design combines a difference-in-differences framework with continuous measures of conflict exposure. While the empirical analysis is constrained by data availability, the framework provides a structured approach to evaluating resilience in conflict-affected economies.