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Regional variation in firm formation: Panel and cross-sectional data evidence from Finland

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Author Info
Aki Kangasharju ()

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Abstract

This paper investigates regional variation in firm formation in Finland between 1989 and 1993. Firstly, the paper describes the firm formation process in 19 regions and 88 subregions, and finds that there has been a clear variation in firm formation across those areas. Secondly, the paper discusses the regional factors which in the literature have most often been found to affect firm formation at the regional level, and estimates the effects of those factors on firm formation utilizing panel data which consists of the Finnish subregions and the five years from 1989 to 1993. Panel data evidence show that the presence of small firms tends most robustly to explain firm formation in Finland. Thirdly, the paper estimates the effects of those regional factors on firm foundation in Finland using cross-sectional data, and compares the results with those obtained by similar methods for several European countries and the USA. Cross-sectional results tend to show that demand growth is also an important factor explaining regional firm formation. An additional finding is that cross- sectional results for Finland appear to be similar to those for other countries, whereas panel data results tend to be somewhat poorer. This implies that there is substantial variation in entry conditions across subregions, and that some of the effects of these entry conditions are being captured by subregion-specific intercept terms, rather than by the explanatory variables used.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa98p134.

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Date of creation: Aug 1998
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Handle: RePEc:wiw:wiwrsa:ersa98p134

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  1. Johnson, Peter & Parker, Simon, 1994. " The Interrelationships between Births and Deaths," Small Business Economics, Springer, vol. 6(4), pages 283-90, August.
  2. Michael Fritsch, 1992. "Regional Differences in New Firm Formation: Evidence from West Germany," Regional Studies, Taylor and Francis Journals, vol. 26(3), pages 233-241, January. [Downloadable!] (restricted)
  3. Audretsch, David B & Acs, Zoltan J, 1994. " New-Firm Startups, Technology, and Macroeconomic Fluctuations," Small Business Economics, Springer, vol. 6(6), pages 439-49, December.
  4. Breusch, T S & Pagan, A R, 1980. "The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics," Review of Economic Studies, Blackwell Publishing, vol. 47(1), pages 239-53, January. [Downloadable!] (restricted)
  5. Paul Reynolds & David Storey & Paul Westhead, 1994. "Cross-national Comparisons of the Variation in New Firm Formation Rates," Regional Studies, Taylor and Francis Journals, vol. 28(4), pages 443-456, July. [Downloadable!] (restricted)
  6. David Audretsch & Michael Fritsch, 1994. "The Geography of Firm Births in Germany," Regional Studies, Taylor and Francis Journals, vol. 28(4), pages 359-365, July. [Downloadable!] (restricted)
  7. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  8. Blanchflower, D. & Oswald, A., 1990. "What Makes A Young Entrepreneur?," Papers 373, London School of Economics - Centre for Labour Economics.
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  9. Gioacchino Garofoli, 1994. "New Firm Formation and Regional Development: The Italian Case," Regional Studies, Taylor and Francis Journals, vol. 28(4), pages 381-393, July. [Downloadable!] (restricted)
  10. Peter Johnson & Simon Parker, 1996. "Spatial Variations in the Determinants and Effects of Firm Births and Deaths," Regional Studies, Taylor and Francis Journals, vol. 30(7), pages 679-688, November. [Downloadable!] (restricted)
  11. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  12. Krugman, Paul, 1991. "History and Industry Location: The Case of the Manufacturing Belt," American Economic Review, American Economic Association, vol. 81(2), pages 80-83, May. [Downloadable!] (restricted)
  13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  14. Kangasharju, Aki & Moisio, Antti, 1998. " Births-Deaths Nexus of Firms: Estimating VAR with Panel Data," Small Business Economics, Springer, vol. 11(4), pages 303-13, December. [Downloadable!] (restricted)
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