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

Emin Dinlersoz, Timothy Dunne, John Haltiwanger and Veronika Penciakova

No 34881, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: L26 M13 R12 (search for similar items in EconPapers)
Date: 2026-02
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