Spatial dynamics of firms is a "microscopic" view of industrial dynamics in regional economies. This paper examines four theoretical frameworks of firm entry, exit, and relocation, namely neoclassical, behavioral, institutional, and evolutionary framework by situating them in the changing philosophy and methodology of economic geography in the western world over the past 60 years. (1) Firms in the neoclassical approach are "homo economicus" whose rule of decision making is profit maximization. Thus, firm entry is a function of expected profits, entry barriers, market risks, and opportunity costs of the entrepreneur. Firm exit is the result of market competition based upon productivity. Firm relocation is triggered by the readjustment of the "spatial margins to profitability" by a combination of pull and push factors of relocation. (2) Firms in the behavioral approach are "satisficers" characterized by bounded rationality and limited information. As a result, new firms might be founded by "innovators" who are alert enough to discover and exploit profit opportunities, but can also be "entry mistakes" if their founders have such motives as the desire for independence and the fear for unemployment. Firm exit is determined by the capability of the entrepreneur and the firm itself; the latter is usually measured by firm age and size. Firm relocation is analyzed by the "behavioral matrix" in which entrepreneurs differ in their ability to acquire and use information. (3) Firms in the institutional approach are embedded in four levels of institutions: informal institutions, formal institutions, governance structures, and resource allocation and employment. Thus, firm entry might be attributed to local culture and social networks, protection of property rights, government development packages and expenditure on public goods, regulation of product markets, personal wealth, and availability of local financial capital. Firm exit could be affected by local social networks, protection of property rights and contract enforcement, government subsidies and tax cutbacks, local protectionism, and labor laws. Firm relocation is a function of keep factors (for example, local social networks), push factors (for example, environment regulation), and pull factors (for example, development incentives, better contract enforcement, and less labor unionization). (4) Firms in the evolutionary approach have "routines" subjected to "selection" by the market. Firm entry is through both contagious diffusion of routines and spin-off dynamics. Firm exit might be influenced by pre-entry experiences whose impact varies over the industry life cycle. Firm relocation is strongly constrained by path dependency and spatial lock-in. This article discusses the problems of current research in terms of theories, data, and methods and proposes suggestions for pushing the frontier of research. It argues that the role of space in firm dynamics shall be further theorized, and the quality of firm-level database and techniques of model-building shall be improved. Compared to research in the West, China lags behind in the field of spatial dynamics of firms both theoretically and empirically. In the catch-up process, western theories should be tailored to China’s unique political regime, economic transformation, and social and geographical background to better guide empirical studies.