Abstract
The aim of this paper is to identify the impact of local characteristics, such as the relative concentration of economic activities, on new business location decisions based on their sectors of economic activity. Spatial establishment-level, micro-data, pooled over time (2008–2014) was used for a typical Canadian nonmetropolitan area—the Lower St. Lawrence region—in the province of Quebec. The study was conducted on a radius of 1250 m to describe the local economic environment. Results of our employed multinomial logit model reveal that local characteristics influence the location decision of new individual establishments for most of the economic sectors. An econometric model is developed to simulate the probability that a new establishment (in a given economic sector) will be located at a given geographic location based on this location’s characteristics. Results confirm that the location decisions for new primary sector businesses are related to the presence of benefits arising from the existence of natural resources as well as those benefits associated with having large spaces (such as in the case of rural cities). New manufacturing sector businesses are mainly looking for a co-location (specialisation) pattern, with a slight preference to locate in small-sized cities. Finally, the location decisions of service sectors firms are strongly dependent on intermediate demand and on the distance to major markets.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
For each sector, the corresponding economic activities are those whose three-digit NAICS code is part of the economic sector.
References
Acs ZJ, Armington C (2006) Entrepreneurship, geography, and American economic growth. Cambridge University Press, Cambridge
Alamá-Sabater L, Artal-Tur A, Navarro-Azorín JM (2011) Industrial location, spatial discrete choice models and the need to account for neighbourhood effects. Ann Reg Sci 47:393–418. https://doi.org/10.1007/s00168-010-0383-7
Andersson M, Koster S (2011) Sources of persistence in regional start-up rates—evidence from Sweden. J Econ Geogr 11:179–201. https://doi.org/10.1093/jeg/lbp069
Arenius P, De Clercq D (2005) A network-based approach on opportunity recognition. Small Bus Econ 24:249–265. https://doi.org/10.1007/s11187-005-1988-6
Arenius P, Minniti M (2005) Perceptual variables and nascent entrepreneurship. Small Bus Econ 24:233–247. https://doi.org/10.1007/s11187-005-1984-x
Artz GM, Kim Y, Orazem PF (2016) Does agglomeration matter everywhere? new firm location decisions in rural and urban markets: does agglomeration matter everywhere? J Reg Sci 56:72–95. https://doi.org/10.1111/jors.12202
Audretsch DB (1995) Innovation and industry evolution. MIT Press, Cambridge
Audretsch D, Falck O, Heblich S (2011) Who’s got the aces up his sleeve? Functional specialisation of cities and entrepreneurship. Ann Reg Sci 46:621–636. https://doi.org/10.1007/s00168-009-0353-0
Audretsch DB, Huelsbeck M, Lehmann EE (2012) Regional competitiveness, university spillovers, and entrepreneurial activity. Small Bus Econ 39:587–601. https://doi.org/10.1007/s11187-011-9332-9
Audretsch DB, Belitski M, Desai S (2015) Entrepreneurship and economic development in cities. Ann Reg Sci 55:33–60. https://doi.org/10.1007/s00168-015-0685-x
Baldwin JR, Brown WM, Rigby DL et al (2008) Économies d’agglomération estimations de panel de microdonnées du secteur canadien de la fabrication. Statistique Canada, Ottawa
Baumol WJ (2002) The free-market innovation machine: analyzing the growth miracle of capitalism. Princeton University Press, Princeton
Beaudry C, Schiffauerova A (2009) Who’s right, Marshall or Jacobs? The localization versus urbanization debate. Res Policy 38:318–337. https://doi.org/10.1016/j.respol.2008.11.010
Behrens K, Sharunova V (2015) Inter-and intra-firm linkages: evidence from microgeographic location patterns. CEPR Discussion Papers, DP 10921
Bhat CR, Paleti R, Singh P (2014) A spatial multivariate count model for firm location decisions: firm location decisions. J Reg Sci. https://doi.org/10.1111/jors.12101
Blanc M, Aubert F, Detang-Dessendre C (1999) Le fonctionnement des marchés du travail ruraux. Écon Rurale 250:31–39. https://doi.org/10.3406/ecoru.1999.5073
Boschma RA, Frenken K (2006) Why is economic geography not an evolutionary science? Towards an evolutionary economic geography. J Econ Geogr 6:273–302. https://doi.org/10.1093/jeg/lbi022
Bosma N, Sternberg R (2014) Entrepreneurship as an urban event? Empirical evidence from European cities. Reg Stud 48:1016–1033. https://doi.org/10.1080/00343404.2014.904041
Brown WM, Statistique Canada, Division de l’analyse économique (2013) Productivité urbaine—qui profite des économies d’agglomération? Statistique Canada, Ottawa
Capello R (2014) Classical contributions: Von Thünen, Weber, Christaller, Lösch. In: Fischer MM, Nijkamp P (eds) Handbook of regional science. Springer, Berlin, pp 507–526
Capozza C, Salomone S, Somma E (2018) Local industrial structure, agglomeration economies and the creation of innovative start-ups: evidence from the Italian case. Entrep Reg Dev 30:749–775. https://doi.org/10.1080/08985626.2018.1457087
Carnahan S (2017) Blocked but not tackled: who founds new firms when rivals dissolve? Strateg Manag J 38:2189–2212. https://doi.org/10.1002/smj.2653
Christaller W (1966) Central places in southern Germany. Prentice Hall, Upper Saddle River
Colombelli A (2016) The impact of local knowledge bases on the creation of innovative start-ups in Italy. Small Bus Econ 47:383–396. https://doi.org/10.1007/s11187-016-9722-0
Dahl MS, Sorenson O (2012) Home sweet home: entrepreneurs’ location choices and the performance of their ventures. Manag Sci 58:1059–1071. https://doi.org/10.1287/mnsc.1110.1476
Daunfeldt S-O, Elert N, Rudholm N (2013) Start-ups and firm in-migration: evidence from the Swedish wholesale industry. Ann Reg Sci 51:479–494. https://doi.org/10.1007/s00168-012-0536-y
Delfmann H, Koster S, McCann P, Van Dijk J (2014) Population change and new firm formation in urban and rural regions. Reg Stud 48:1034–1050. https://doi.org/10.1080/00343404.2013.867430
Delgado M, Porter ME, Stern S (2010) Clusters and entrepreneurship. J Econ Geogr 10:495–518. https://doi.org/10.1093/jeg/lbq010
Doloreux D, Shearmur R (2012) The use of knowledge-intensive business services in SME manufacturing firms in Quebec: performance diagnosis and drivers of innovation by sector and region. INRS Centre-Urbanisation Culture Société
Dubé J, Brunelle C (2014) Dots to dots: a general methodology to build local indicators using spatial micro-data. Ann Reg Sci 53:245–272. https://doi.org/10.1007/s00168-014-0627-z
Dubé J, Lemelin A (2005) Estimation expérimentale des flux d’échanges interrégionaux par la méthode de minimisation de l’entropie croisée. Rev Can Sci Rég 28:514–533
Dubé J, Brunelle C, Legros D (2016) Location theories and business location decision: a micro-spatial investigation in Canada. Rev Reg Stud 46:143
Duranton G, Puga D (2001) Nursery cities: urban diversity, process innovation, and the life cycle of products. Am Econ Rev 91:1454–1477
Duranton G, Puga D (2004) Micro-foundations of urban agglomeration economies. Handb Reg Urban Econ 4:2063–2117
Ellison G, Glaeser EL (1997) Geographic concentration in US manufacturing industries: a dartboard approach. J Polit Econ 105:889–927
Feldman M, Zoller TD (2012) Dealmakers in place: social capital connections in regional entrepreneurial economies. Reg Stud 46:23–37. https://doi.org/10.1080/00343404.2011.607808
Figueiredo O, Guimaraes P, Woodward D (2002) Home-field advantage: location decisions of Portuguese entrepreneurs. J Urban Econ 52:341–361. https://doi.org/10.1016/S0094-1190(02)00006-2
Frenken K, Van Oort F, Verburg T (2007) Related variety, unrelated variety and regional economic growth. Reg Stud 41:685–697. https://doi.org/10.1080/00343400601120296
Fritsch M, Falck O (2007) New business formation by industry over space and time: a multidimensional analysis. Reg Stud 41:157–172. https://doi.org/10.1080/00343400600928301
Fritsch M, Wyrwich M (2017) Persistence of regional entrepreneurship: causes, effects, and directions for future research. Int Rev Entrep 15:395–416
Gaigné C, Goffette-Nagot F (2008) Localisation rurale des activités industrielles. Que nous enseigne l’économie géographique? Rev Etudes En Agric Environ-Rev Agric Environ Stud 87:101–130
Glaeser EL, Kallal HD, Scheinkman JA, Shleifer A (1992) Growth in cities. J Polit Econ 100:1126–1152
Glaeser EL, Kerr WR, Ponzetto GAM (2010a) Clusters of entrepreneurship. J Urban Econ 67:150–168. https://doi.org/10.1016/j.jue.2009.09.008
Glaeser EL, Rosenthal SS, Strange WC (2010b) Urban economics and entrepreneurship. J Urban Econ 67:1–14. https://doi.org/10.1016/j.jue.2009.10.005
Hakimi SL (1964) Optimum locations of switching centers and the absolute centers and medians of a graph. Oper Res 12:450–459
Hans L, Koster S (2017) Urbanization and start-up rates in different geographies: Belgium, the Netherlands, and Sweden. Small Bus Econ. https://doi.org/10.1007/s11187-017-9967-2
Harris CD (1954) The market as a factor in the localization of industry in the United States. Ann Assoc Am Geogr 44:315. https://doi.org/10.2307/2561395
Helpman E, Krugman PR (1985) Market structure and foreign trade: increasing returns, imperfect competition, and the international economy. MIT Press, Cambridge
Henderson JV (2003) Marshall’s scale economies. J Urban Econ 53:1–28. https://doi.org/10.1016/S0094-1190(02)00505-3
Herrendorf B, Rogerson R, Valentinyi Á (2014) Growth and structural transformation. In: Handbook of economic growth. Elsevier, Amsterdam, pp 855–941
Huggins R, Williams N (2011) Entrepreneurship and regional competitiveness: the role and progression of policy. Entrep Reg Dev 23:907–932. https://doi.org/10.1080/08985626.2011.577818
Huiban JP, Detang-Dessendre C, Aubert F (2004) Urban versus rural firms: is there a spatial heterogeneity of labour demand? Environ Plan A 36:2033–2045. https://doi.org/10.1068/a36207
ISQ (2018) Panorama des régions du Québec. INSTITUT DE LA STATISTIQUE DU QUÉBEC
ISQ I de la S du (2019) Profils statistiques de la Région du Bas Saint Laurent. http://www.stat.gouv.qc.ca/statistiques/profils/region_01/region_01_00.htm. Accessed 12 Apr 2019
Jacobs J (1969) The economy of cities. Random House, New York
Jofre-Monseny J, Marín-López R, Viladecans-Marsal E (2014) The determinants of localization and urbanization economies: evidence from the location of new firms in spain: determinants of localization and urbanization economies. J Reg Sci 54:313–337. https://doi.org/10.1111/jors.12076
Karlsson C, Dahlberg R (2003) Entrepreneurship, firm growth and regional development in the new economic geography: introduction. Small Bus Econ 21:73–76
Kibler E, Kautonen T, Fink M (2014) Regional social legitimacy of entrepreneurship: implications for entrepreneurial intention and start-up behaviour. Reg Stud 48:995–1015. https://doi.org/10.1080/00343404.2013.851373
Kolko Jed (2010) Urbanization, agglomeration, and coagglomeration of service industries. The University of Chicago Press, Chicago
Krugman P (1991) Increasing returns and economic geography. J Polit Econ 99:483–499
Krugman P (1998) What’s new about the new economic geography? Oxf Rev Econ Policy 14:7–17. https://doi.org/10.1093/oxrep/14.2.7
Lee SY, Florida R, Acs ZJ (2004) Creativity and entrepreneurship: a regional analysis of new firm formation. Reg Stud 38:879–891. https://doi.org/10.1080/0034340042000280910
Lee BS, Jang S, Hong Sung Hyo (2010) Marshall’s scale economies and jacobs’ externality in Korea: the role of age, size and the legal form of organisation of establishments. Urban Stud 47:3131–3156. https://doi.org/10.1177/0042098009359953
Losch A (1954) Economics of location. Yale University Press, New Haven
Mack EA, Rey SJ (2014) An econometric approach for evaluating the linkages between broadband and knowledge intensive firms. Telecommun Policy 38:105–118. https://doi.org/10.1016/j.telpol.2013.06.003
Malecki EJ (2018) Entrepreneurship and entrepreneurial ecosystems. Geogr. Compass 12:e12359. https://doi.org/10.1111/gec3.12359
Marcon E, Puech F (2010) Measures of the geographic concentration of industries: improving distance-based methods. J Econ Geogr 10:745–762. https://doi.org/10.1093/jeg/lbp056
Marcon É, Puech F (2014) Mesures de la concentration spatiale en espace continu: théorie et applications. Econ Stat 474:105–131
Marshall A (1890) Principles of economics: an introductory volume, 8th edn. Macmillan, London
MEI M de l’Économie et de l’innovation (2019) Bas-Saint-Laurent, Portrait Régional
Meijers EJ, Burger MJ, Hoogerbrugge MM (2016) Borrowing size in networks of cities: city size, network connectivity and metropolitan functions in Europe: borrowing size in networks of cities. Pap Reg Sci 95:181–198. https://doi.org/10.1111/pirs.12181
Michelacci C, Silva O (2007) Why so many local entrepreneurs? Rev Econ Stat 89:615–633. https://doi.org/10.1162/rest.89.4.615
Müller S (2016) A progress review of entrepreneurship and regional development: what are the remaining gaps? Eur Plan Stud 24:1133–1158. https://doi.org/10.1080/09654313.2016.1154506
Nicotra M, Romano M, Del Giudice M, Schillaci CE (2018) The causal relation between entrepreneurial ecosystem and productive entrepreneurship: a measurement framework. J Technol Transf 43:640–673. https://doi.org/10.1007/s10961-017-9628-2
Partridge MD, Rickman DS, Ali K, Olfert MR (2010) Recent spatial growth dynamics in wages and housing costs: proximity to urban production externalities and consumer amenities. Reg Sci Urban Econ 40:440–452. https://doi.org/10.1016/j.regsciurbeco.2010.05.003
Pe’er A, Vertinsky I (2008) Firm exits as a determinant of new entry: Is there evidence of local creative destruction? J Bus Ventur 23:280–306. https://doi.org/10.1016/j.jbusvent.2007.02.002
Piacentino D, Bono F, Cracolici MF, Giuliani D (2017) A spatial analysis of new business formation: replicative vs innovative behaviour. Spat Stat 21:390–405. https://doi.org/10.1016/j.spasta.2017.02.004
Plummer LA, Acs ZJ (2014) Localized competition in the knowledge spillover theory of entrepreneurship. J Bus Ventur 29:121–136. https://doi.org/10.1016/j.jbusvent.2012.10.003
Porter ME (1990) The competitive advantage of nations. Free Press, New York
Qian H, Acs ZJ, Stough RR (2013) Regional systems of entrepreneurship: the nexus of human capital, knowledge and new firm formation. J Econ Geogr 13:559–587. https://doi.org/10.1093/jeg/lbs009
Renski H (2008) New firm entry, survival, and growth in the United States: a comparison of urban, suburban, and rural areas. J Am Plann Assoc 75:60–77. https://doi.org/10.1080/01944360802558424
Rogers TM (2012) Bank market structure and entrepreneurship. Small Bus Econ 39:909–920. https://doi.org/10.1007/s11187-011-9320-0
Rosenthal SS, Strange WC (2003) Geography, industrial organization, and agglomeration. Rev Econ Stat 85:377–393
Rosenthal SS, Strange WC (2010) Small establishments/big effects: agglomeration, industrial organization and entrepreneurship. In: Agglomeration economics. University of Chicago Press, Chicago, pp 277–302
Sato Y, Tabuchi T, Yamamoto K (2012) Market size and entrepreneurship. J Econ Geogr 12:1139–1166. https://doi.org/10.1093/jeg/lbr035
Schafran A, McDonald C, Lopez Morales E et al (2018) Replacing the services sector and three-sector theory: urbanization and control as economic sectors. Reg Stud 52:1708–1719. https://doi.org/10.1080/00343404.2018.1464136
Scholl T, Brenner T (2016) Detecting spatial clustering using a firm-level cluster index. Reg Stud 50:1054–1068. https://doi.org/10.1080/00343404.2014.958456
Schumpeter JA (1941) Capitalism, socialism, and democracy. Harper, New York
Smith HL, Bagchi-Sen S (2012) The research university, entrepreneurship and regional development: research propositions and current evidence. Entrep Reg Dev 24:383–404. https://doi.org/10.1080/08985626.2011.592547
Stam E (2007) Why butterflies don’t leave: locational behavior of entrepreneurial firms. Econ Geogr 83:27–50
Stam E (2018) Measuring entrepreneurial ecosystems. In: O’Connor A, Stam E, Sussan F, Audretsch DB (eds) Entrepreneurial ecosystems: place-based transformations and transitions. Springer, Cham, pp 173–197
Stam E, Spigel B (2018) The SAGE handbook of small business and entrepreneurship. SAGE Publications Ltd, Thousand Oaks
StataCorp (2013) Stata 13 Base Reference Manual. Stata Press, College Station, TX
Statistics Canada (2017a) Focus on geography series, 2016 census. http://www12.statcan.gc.ca/census-recensement/2016/as-sa/fogs-spg/select-Geo-Choix.cfm?Lang=eng&GK=CSD&TOPIC=7. Accessed 22 Feb 2018
Statistics Canada (2017b) Census metropolitan area and census agglomeration definitions: 2016 census metropolitan area and census agglomeration strategic review consultation guide. https://www.statcan.gc.ca/pub/93-600-x/2010000/definitions-eng.htm. Accessed 23 Feb 2018
Statistics Canada SC (2016) Population centre (POPCTR). https://www12.statcan.gc.ca/census-recensement/2016/ref/dict/geo049a-eng.cfm. Accessed 26 Mar 2019
Sternberg R (2012) Do EU regional policies favour regional entrepreneurship? Empirical Evidence from Spain and Germany. Eur Plan Stud 20:583–608. https://doi.org/10.1080/09654313.2012.665030
Sternberg R, Wennekers S (2005) Determinants and effects of new business creation using global entrepreneurship monitor data. Small Bus Econ 24:193–203
van Stel A, Suddle K (2008) The impact of new firm formation on regional development in the Netherlands. Small Bus Econ 30:31–47. https://doi.org/10.1007/s11187-007-9054-1
Wagner J, Sternberg R (2004) Start-up activities, individual characteristics, and the regional milieu: lessons for entrepreneurship support policies from German micro data. Ann Reg Sci 38:219–240. https://doi.org/10.1007/s00168-004-0193-x
Weber A (1909) Theory of the location of industries. University of Chicago Press, Chicago
Williams N, Huggins R, Thompson P (2017) Social capital and entrepreneurship: does the relationship hold in deprived urban neighbourhoods? Growth Change 48:719–743. https://doi.org/10.1111/grow.12197
Wojan TR (2000) The composition of rural employment growth in the “new economy”. Am J Agric Econ 82:594–605. https://doi.org/10.1111/0002-9092.00049
Wulff JN (2015) Interpreting results from the multinomial logit model: demonstrated by foreign market entry. Organ Res Methods 18:300–325. https://doi.org/10.1177/1094428114560024
Wyrwich M, Sternberg R, Stuetzer M (2019) Failing role models and the formation of fear of entrepreneurial failure: a study of regional peer effects in German regions. J Econ Geogr 19:567–588. https://doi.org/10.1093/jeg/lby023
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Cissé, I., Dubé, J. & Brunelle, C. New business location: how local characteristics influence individual location decision?. Ann Reg Sci 64, 185–214 (2020). https://doi.org/10.1007/s00168-019-00968-1
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00168-019-00968-1