Determinants of Regional Entry and Exit in Industrial Sectors

Recent empirical research by, for example, Audretsch and Fritsch (1999) and Armington andAcs, (2002) shows that regional determinants of new firm formation differs between industries. Ithas also been suggested that a large part of the regional variation of new firm formation can beexplained by differences in industrial structure. This paper reinvestigates the regionaldeterminants of entry and exit considering these findings. The empirical analysis is performedusing data on Swedish firm entry and exit rates for 1997-2001. It is shown that on average about0.5 to 2.7 percent of the regional variation in entry and exit rates remains to be explained, aftercontrolling for differences in industrial structure, but that there is substantial regional variation. Amajority of the firms in the 47 industries investigated are sensitive to unobserved regionalcharacteristics, such as regional policy when deciding to enter or exit a particular region.Agglomeration and the size structure in the particular industry and region are factors that arefound to influence entry and exit rates in almost all industries.QC 2012020