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Local Industry Agglomeration and New Business Activity

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  • Todd Gabe

Abstract

New businesses are highly involved in innovative activity, which enhances worker productivity and leads to increased economic output. This paper investigates the effects of industry concentration on the incidence of new business openings in the 5,504 Maine county‐industries. Empirical findings indicate that new business activity increases with the number of incumbent establishments in a county‐industry and its concentration level relative to the U.S. economy. Model simulations show that raising county‐industries, with no initial industry presence, to concentration levels similar to that of the industry in the U.S. economy results in a 1.7 to 8.9 percent increase in the expected number of business openings over a three‐year period. Empirical results also suggest that industry clusters comprised of young and small establishments are more conducive to new business formation than clusters made up of mature and large companies.

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  • Todd Gabe, 2003. "Local Industry Agglomeration and New Business Activity," Growth and Change, Wiley Blackwell, vol. 34(1), pages 17-39, February.
    • Handle: RePEc:bla:growch:v:34:y:2003:i:1:p:17-39
    DOI: 10.1111/1468-2257.00197
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    1. Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1998. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521633574.
      • Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1995. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521465618.
    2. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
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    1. Georgeanne M. Artz & Younjun Kim & Peter F. Orazem, 2016. "Does Agglomeration Matter Everywhere?: New Firm Location Decisions In Rural And Urban Markets," Journal of Regional Science, Wiley Blackwell, vol. 56(1), pages 72-95, January.
    2. Mengmeng Liu & Wanqing Wu & Hua Li, 2023. "The Influence of Grassland Ecological Compensation Policy on Grassland Quality: Evidence from the Perspective of Grassland Ecosystem Vulnerability," Agriculture, MDPI, vol. 13(9), pages 1-15, September.
    3. Daniel Liviano & Josep-Maria Arauzo-Carod, 2013. "Industrial location and interpretation of zero counts," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(2), pages 515-534, April.
    4. Jason Brown & Dayton Lambert, 2014. "Location decisions of natural gas extraction establishments: a smooth transition count model approach," Research Working Paper RWP 14-5, Federal Reserve Bank of Kansas City.
    5. Liviano Solís, Daniel & Arauzo Carod, Josep Maria, 2011. "Industrial Location and Space: New Insights," Working Papers 2072/152137, Universitat Rovira i Virgili, Department of Economics.
    6. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    7. Chandra R. Bhat & Rajesh Paleti & Palvinder Singh, 2014. "A Spatial Multivariate Count Model For Firm Location Decisions," Journal of Regional Science, Wiley Blackwell, vol. 54(3), pages 462-502, June.
    8. Josep‐Maria Arauzo‐Carod & Daniel Liviano‐Solis & Miguel Manjón‐Antolín, 2010. "Empirical Studies In Industrial Location: An Assessment Of Their Methods And Results," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 685-711, August.
    9. Georgeanne M. Artz & Younjun Kim & Peter F. Orazem & Peter J. Han, 2021. "Which Small Towns Attract Start‐Ups and Why? Twenty Years of Evidence from Iowa," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 702-720, March.
    10. Qingfang Wang, 2010. "Immigration and Ethnic Entrepreneurship: A Comparative Study in the United States," Growth and Change, Wiley Blackwell, vol. 41(3), pages 430-458, September.
    11. Adrienne DiTommaso & Robert T. Greenbaum, 2021. "An Examination of the Relationship Between Local Tax Incentives and Diversification of the Local Economic Base," Economic Development Quarterly, , vol. 35(2), pages 108-124, May.
    12. Josep-Maria Arauzo-Carod, 2013. "Location Determinants of New Firms: Does Skill Level of Human Capital Really Matter?," Growth and Change, Wiley Blackwell, vol. 44(1), pages 118-148, March.
    13. Andrew Crawley & Todd M. Gabe & Mariya Pominova, 2021. "The Pitfalls of Using Location Quotients to Identify Clusters and Represent Industry Specialization in Small Regions," International Finance Discussion Papers 1329, Board of Governors of the Federal Reserve System (U.S.).
    14. Jiang, Yonglei & Timmermans, Harry J.P. & Yu, Bin, 2018. "Relocation of manufacturing industry from the perspective of transport accessibility – An application of percolation theory," Transport Policy, Elsevier, vol. 63(C), pages 10-29.
    15. Todd M. Gabe, 2005. "Industry Agglomeration and Investment in Rural Businesses," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(1), pages 89-103.
    16. Josep‐Maria Arauzo‐Carod, 2008. "Industrial Location At A Local Level: Comments On The Territorial Level Of The Analysis," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 99(2), pages 193-208, April.
    17. Todd M. Gabe, 2007. "Local Economic Instability and Business Location: The Case of Maine," Land Economics, University of Wisconsin Press, vol. 83(3), pages 398-411.
    18. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.
    19. Todd M. Gabe, 2004. "Establishment Growth in Small Cities and Towns," International Regional Science Review, , vol. 27(2), pages 164-186, April.

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