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Survival, productivity and growth of new ventures across locations

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Abstract

We assess the impact of the location of genuinely new ventures and spinoffs on these firms’ survival, productivity and growth. The study distinguishes between four different categories of locations: metro cities, metro regions, urban areas, and rural areas. Using a unique database covering more than 23,000 new entrants between 2000 and 2004 in Sweden and observing them for 5 years, several conclusions may be drawn from our study. First, there is a substantial difference in ex-post entry performance between the manufacturing and service sectors. Second, the proposed superiority of start-ups by ex-employees depends on the performance measures and the sector. Third, knowledge and technology intensity of the industry matter for the viability of the new firms.

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Notes

  1. Wennberg and Lindqvist (2010) find a positive effect of localization, in the form of high concentration of related workers and establishments, on the survival of Swedish entrants in knowledge-intensive industries.

  2. Firms that were a minority in the parent firm the year before the transition to the new venture but a majority in the new firm the year after the transition are considered to be entrepreneurial spawns or spinouts.

  3. To be considered a spinout, the new venture cannot be a branch of an existing business. Some firms may erroneously be classified as new if they have been inactive for some time or if they have high turnover. By applying two identifiers coming from Business Statistic and Statistic Sweden and by tracking each firm during the years prior to their entry (our records date back to 1997), we avoid misclassifying these firms as new.

  4. Cohort 1: 2000–2004, Cohort 2, 2001–2005…Cohort 5: 2004–2008.

  5. Primary sector is not included in the study. For a detailed description of the classification, see http://epp.eurostat.ec.europa.eu/cache/ITY_SDDS/Annexes/hrst_st_esms_an9.pdf.

  6. For the robustness check, OLS and random effect models are also estimated. The results are available upon request.

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Acknowledgments

The authors would like to thank three anonymous referees and the handling editor for helpful comments and suggestions.

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  1. Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology, Stockholm, Sweden

    Hans Lööf & Pardis Nabavi

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  1. Hans Lööf
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Correspondence to Hans Lööf.

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Lööf, H., Nabavi, P. Survival, productivity and growth of new ventures across locations. Small Bus Econ 43, 477–491 (2014). https://doi.org/10.1007/s11187-014-9553-9

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