Dynamic financial landscapes and entrepreneurial cultures on new firm formation in different industries

Cynthia Sin Tian Ho () and Andreas Fili ()
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Cynthia Sin Tian Ho: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Divison of real estate business and financial systems, Teknikringen 10B, 100 44 Stockholm, Sweden
Andreas Fili: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Divison of real estate business and financial systems, Teknikringen 10B, 100 44 Stockholm, Sweden

No 20/12, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: In this paper, the effect of local entrepreneurial attitudes and proximity to bank branches on new firm formation in different industries is analysed using spatial Durbin models for a panel dataset of two years — 2007 and 2013 on the municipal level. Previous studies have shown that a high level of regional social legitimacy increases the demand for entrepreneurship due to perceivably better access to resources and the entrepreneur has also higher confidence in his ability to run a business in the area (Kibler, Kautonen, and Fink 2014). Furthermore, previous studies has also shown that the proximity of banks is important for local entrepreneurial activity (Agarwal and Hauswald 2010; Backman 2015; Backman and Wallin 2018; Ho and Berggren 2020). It is also noted that every entrepreneurial ecosystem in each municipality is unique and can be industry specific. The results from our spatial models show that an increase in the local public attitudes has positive significant effects on new firm formation in these following industries: manufacturing, construction and ‘financial and business services’ industries. Our results also show that when weighted mean distance to the nearest bank branch doubled, there is a 4.5% decrease in the total number of new firms formed. Weighted mean distance to the nearest bank branch has also been shown to lower new firm formation especially in two industries — ‘financial and business services’ and ‘education, health and others’.

Keywords: Attitudes; Banks; New Firm Formation; Industries; Spatial Analysis (search for similar items in EconPapers)
JEL-codes: C23 E71 G21 L26 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2020-10-12
New Economics Papers: this item is included in nep-cse, nep-ent, nep-sbm and nep-ure
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