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Would be easier to share thought if there are more details.
Reneging for what alternative? A similar firm that’s a direct competitor or a bigger firm or a different type of opportunity (e.g., signed consulting but reneging to go to industry)?
Regardless of the above, if you’re nice and humble about it when bowing out, it’s usually not a problem but depending on the company don’t expect to go back there in the near-term.
I'd take back the offer because my current firm made a competitive counter offer
Honestly you will burn the bridge with the firm you reneged at, but no one will reach out to other places to mess with you. That’s just a myth. Just be professional about it and pull out quickly.
I think it depends on how you handle it and how they receptive they are. These things do happen but I find smaller firms won’t take rejection well even before signing a contract. You may want to be ok with burning that bridge