The Determinants of New-firm Survival across Regional Economies

Zoltan J. Acs, (), Catherine Armington and Ting Zhang ()

Discussion Papers on Entrepreneurship, Growth and Public Policy from Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy

Abstract: 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.

Keywords: New-Firm Survival; Human Capital; Knowledge Spillovers; Entrepreneurship; Labor Market Area (search for similar items in EconPapers)
JEL-codes: J24 L80 M13 O3 R1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-ent, nep-geo, nep-hrm, nep-knm and nep-ure
Date: Written 2006-12
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