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The Local Origins of Business Formation: Entry as a Two-Stage Process

Author

Listed:
  • Emin Dinlersoz
  • Timothy Dunne
  • John C. Haltiwanger
  • Veronika Penciakova

Abstract

The business entry literature typically observes firms only at the first hire. We provide a new perspective using linked administrative microdata tracking the universe of U.S. business applications and their transition into employer firms. We model entry as a two-stage process: pursuit of a business idea (proxied by a business application) and implementation (transition). Results show these margins are distinct and associate differently with local conditions. While both margins matter, high-startup locations are characterized by high application intensity, whereas low-startup locations exhibit low transition rates, suggesting geographic disparities in entry arise from different dynamics at each stage of the entrepreneurial process.

Suggested Citation

  • Emin Dinlersoz & Timothy Dunne & John C. Haltiwanger & Veronika Penciakova, 2026. "The Local Origins of Business Formation: Entry as a Two-Stage Process," NBER Working Papers 34881, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34881
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    1. is not listed on IDEAS
    2. repec:ags:aaea22:343903 is not listed on IDEAS
    3. Lucas, David S., 2024. "The effect of regime change on entrepreneurship: A real options approach with evidence from US gubernatorial elections," Journal of Business Venturing, Elsevier, vol. 39(4).
    4. Emin Dinlersoz & Yueyuan Ma, 2026. "Expectations versus Reality in Business Formation," Working Papers 26-11, Center for Economic Studies, U.S. Census Bureau.
    5. Emin Dinlersoz & Can Dogan & Nikolas Zolas, 2024. "Starting Up AI," Working Papers 24-09, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    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
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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