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Local Rates of New Firm Formation: An Empirical Exploration using Swedish Data

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  • Andersson, Martin

    (Department of Economics, Blekinge Institute of Technology)

  • Lavesson, Niclas

    (CIRCLE, Lund University)

  • Partridge, Mark D.

    (Ohio State University)

Abstract

We assess the empirical literature on the determinants of spatial variations in new-firm formation rates by undertaking a systematic empirical analysis of the relative roles of different demand- and supply-side factors. Using instrumental variables to address endogeneity, we find that local growth drives local entrepreneurship exclusively in services industries. Average establishment size has a robust negative influence on local new-firm formation rates, but its effect varies across industries. Local industry diversity is only positive for new-firm formation in high-tech and knowledge-intensive activities. There is also some evidence of that longer distances to urban centers is associated with higher new-firm formation rates. The only local factor with a consistent positive effect on new-firm formation across industries is local density of skilled workers. We conclude that industry structure, geography and agglomeration matter, but in the end, new firms are started by people, so it is unsurprising that the main factor driving local entrepreneurship is the characteristics of the local residents.

Suggested Citation

  • Andersson, Martin & Lavesson, Niclas & Partridge, Mark D., 2019. "Local Rates of New Firm Formation: An Empirical Exploration using Swedish Data," Working Paper Series 1290, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1290
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    Cited by:

    1. Martin Andersson & Johan P. Larsson, 2022. "Historical local industry structure, voting patterns and the long-run entrepreneurial character of regions: Swedish examples," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(3), pages 611-631, December.
    2. Gao, Xue, 2021. "The comparative impact of solar policies on entrepreneurship in the U.S. solar photovoltaic installation industry," Energy Policy, Elsevier, vol. 156(C).
    3. Mikaela Backman & Janet E. Kohlhase, 2022. "Labor force diversity and new firm formation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 9-28, February.
    4. David B. Audretsch & Maksim Belitski & Georg Eichler, 2020. "Bilingualism and regional entrepreneurship," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(3), pages 787-806, December.

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    More about this item

    Keywords

    Entrepreneurship; New firm formation; Geography; Human capital; Agglomeration; Local growth; Startups;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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