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The Determinants of New-firm Survival across Regional Economies


  • Zoltan J. Acs
  • Catherine Armington
  • Ting Zhang


Motivated by differences in new-firm survival across regions, this paper explores the impact of regional human capital on new-firm survival rates. New-firm survival is interpreted through formation rates of surviving versus closed firms in the service sector. By incorporating knowledge spillovers through a geographical variation model for Labor Market Areas, we empirically test the relationship between regional human capital stocks and new-firm survival. The expected positive relationship between regional human capital and new-firm survival is supported for the period 1993-1995, but is not as strong for the recession period 1990-1992. Controlling for human capital, the new-firm survival rate is negatively related to service sector specialization and positively related to all industry intensity, suggesting that city size and diversity may be an important determinant of new-firm survival in both periods.

Suggested Citation

  • Zoltan J. Acs & Catherine Armington & Ting Zhang, 2006. "The Determinants of New-firm Survival across Regional Economies," Papers on Entrepreneurship, Growth and Public Policy 2007-04, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  • Handle: RePEc:esi:egpdis:2007-04

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    References listed on IDEAS

    1. Zoltan Acs & Catherine Armington, 2004. "Employment Growth and Entrepreneurial Activity in Cities," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 911-927.
    2. Acs, Zoltan J. & Armington, Catherine, 2004. "The impact of geographic differences in human capital on service firm formation rates," Journal of Urban Economics, Elsevier, vol. 56(2), pages 244-278, September.
    3. Ian Smith & Zoltan J. Acs & Felix R. FitzRoy, 2002. "High-technology employment and R&D in cities: Heterogeneity vs specialization," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 36(3), pages 373-386.
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    Cited by:

    1. Zoltán J. Ács & Pamela Mueller, 2015. "Employment effects of business dynamics: Mice, Gazelles and Elephants," Chapters,in: Global Entrepreneurship, Institutions and Incentives, chapter 16, pages 304-319 Edward Elgar Publishing.
    2. Qingfang Wang, 2009. "Gender, ethnicity, and self-employment: a multilevel analysis across US metropolitan areas," Environment and Planning A, Pion Ltd, London, vol. 41(8), pages 1979-1996, August.
    3. Marco Vivarelli, 2012. "Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1286, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    4. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    5. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute for the Study of Labor (IZA).
    6. Maksim Belitski & Julia Korosteleva & Julia Korosteleva, 2012. "Entrepreneurial Dynamics and Higher Education Institutions: Evidence from the Post-Communist World," UCL SSEES Economics and Business working paper series 120, UCL School of Slavonic and East European Studies (SSEES).
    7. Juan Felipe Parra, 2011. "Determinantes de la probabilidad de cierre de nuevas empresas en Bogotá," REVISTA FACULTAD DE CIENCIAS ECONÓMICAS, UNIVERSIDAD MILITAR NUEVA GRANADA, June.
    8. Alexandra Tsvetkova & Jean-Claude Thill & Deborah Strumsky, 2014. "Metropolitan innovation, firm size, and business survival in a high-tech industry," Small Business Economics, Springer, vol. 43(3), pages 661-676, October.
    9. Henry Renski, 2014. "The Influence of Industry Mix on Regional New Firm Formation in the United States," Regional Studies, Taylor & Francis Journals, vol. 48(8), pages 1353-1370, August.

    More about this item


    New-Firm Survival; Human Capital; Knowledge Spillovers; Entrepreneurship; Labor Market Area;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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