What determines entry? Evidence from Sweden

In the literature concerning the geography of new firm formation, explanatory variables pertaining to industrial organization and political economy are seldom considered. Such variables were thus included when investigating what conditions influenced entry of Swedish limited liability firms during 2000-2008, using data that make it possible to trace entry geographically as well as in what industry it occurs down to the five-digit NACE-level. To deal with overdispersion in the data, a negative binomial regression model was estimated. Political variables, e.g., municipal tax rate and the ideology of local rule, were found to be of limited importance, whereas industry-specific conditions seem to have affected entry. Municipalities with industries with high minimum efficient scale of production or high market concentration rates were considerably less likely to see new firm formation. Substantially more entry occurred in municipalities with high income and a well-educated population.