Firm Size and Geographical Aggregation: An Empirical Appraisal in Industrial Location

Abstract

This paper assesses empirically the importance of size discrimination and disaggregate data for deciding where to locate a start-up concern. We compare three econometric specifications using Catalan data: a multinomial logit with 4 and 41 alternatives (provinces and comarques, respectively) in which firm size is the main covariate; a conditional logit with 4 and 41 alternatives including attributes of the sites as well as size-site interactions; and a Poisson model on the comarques and the full spatial choice set (942 municipalities) with site-specific variables. Our results suggest that if these two issues are ignored, conclusions may be misleading. We provide evidence that large and small firms behave differently and conclude that Catalan firms tend to choose between comarques rather than between municipalities. Moreover, labour-intensive firms seem more likely to be located in the city of Barcelona.

This is a preview of subscription content, access via your institution.

References

  1. Bartik, T., 1985, ‘Business Location Decisions in the United States: Estimates of the Effects of Unionization, Taxes and Other Characteristics of States’, Journal of Business and Economic Statistic 3, 14-22.

    Google Scholar 

  2. Baudewyns, D., 1999, ‘La Localisation Intra-Urbaine Des Firmes: Une Estimation Logit Multinomiale’, Révue d'économie Régionale et Urbaine 5, 915-930.

    Google Scholar 

  3. Baudewyns, D., M. B. Ayad and Sekkat, 2000, ‘Infrastructure publique et localisation des enterprises à Bruxelles et en Wallonie’, in M. Beine and F. Docquier (eds.), La Politique de Dévelopement Local et L'infrastructure Publique: Bruxelles et Wallonie, Bruxelles.

  4. Birch, M., 1963, ‘Maximum Likelihood in Three-Way Contingency Tables’, Journal of the Royal Statistical Society, Series B (Methodological) 25, 220-233.

    Google Scholar 

  5. Callejón, M. and M. Costa, 1996, ‘Geografía de la producción. Incidencia de las externalidades en la localización de las actividades en España’, Información Comercial Española 754, 39-49.

    Google Scholar 

  6. Callejón, M. and A. Segarra, 1998), ‘Dinámica empresarial, eficiencia y crecimiento industrial en las regiones españolas (1980–1992)’, Revista Asturiana de Economía 11, 137-157.

    Google Scholar 

  7. Carlton, D., 1979, ‘Why New Firms Locate Where They Do: An Econometric Model’, in W. Wheaton (ed.), Interregional Movements and Regional Growth, Washington: The Urban Institute, 13-50.

    Google Scholar 

  8. Carlton, D., 1983, ‘The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables’, Review of Economics and Statistics 65, 440-449.

    Google Scholar 

  9. Chapman, K. and D. Walker, 1991, Industrial Location. Principles and Policies, Oxford: Basil Blackwell.

    Google Scholar 

  10. Coombes, M., A. Green, S. Openshaw, 1986, ‘An Efficient Algorithm to Generate Official Statistical Reporting Areas: The Case of the 1984 Travel-to-Work Areas Revision in Britain’, Journal of the Operational Research Society 37(10), 943-953.

    Google Scholar 

  11. Costa, M., A. Segarra and E. Viladecans, 2000, ‘Business Dynamics and Territorial Flexibility’, paper presented at the 40th European Congress of the Regional Science Association, Barcelona.

  12. Cotorruelo, R. and A. Vázquez, 1997, ‘Nuevas pautas de localización de las empresas industriales en España’, in A. Vázquez, G. Garofoli and J. P. Gilly (eds.), Gran Empresa y Desarrollo Económico, Madrid: Síntesis, 171-214.

    Google Scholar 

  13. Coughlin, C., J. Terza and V. Arromdee, 1991, ‘State Characteristics and the Location of Foreign Direct Investment within the United States’, The Review of Economics and Statistics 73, 675-683.

    Google Scholar 

  14. Figueiredo, O., P. Guimarães and D. Woodward, 2002, ‘Home-Field Advantage: Location Decision of Portuguese Entrepreneurs’, Journal of Urban Economics 52, 341-361.

    Google Scholar 

  15. Friedman, J., D. Gerlowski and J. Silberman, 1992, ‘What Attracts Foreign Multinational Corporations?’, Journal of Regional Science 32, 403-418.

    Google Scholar 

  16. Geroski, P., 1995, ‘What Do We Know about Entry?’, International Journal of Industrial Organization 100, 1126-1152.

    Google Scholar 

  17. Greene, W., 2000, Econometric Analysis, Prentice Hall Inc.

  18. Guimarães, P., O. Figueiredo and D. Woodward, 2000, ‘Agglomeration and the Location of Foreign Direct Investment in Portugal’, Journal of Urban Economics 47, 115-135.

    Google Scholar 

  19. Guimarães, P., O. Figueiredo and D. Woodward, 2003, ‘A Tractable Approach to the Firm Location Decision Problem’, Review of Economics and Statistics 85, Forthcoming.

  20. Hansen, E. R., 1987, ‘Industrial Location Choice in São Paulo, Brazil: A Nested Logit Model’, Regional Science and Urban Economics 17, 89-108.

    Google Scholar 

  21. Henderson, V., A. Kuncoro and M. Turner, 1995, ‘Industrial Development in Cities’, Journal of Political Economy 103, 1067-1090.

    Google Scholar 

  22. Johnson, P. and D. Cathcart, 1979, ‘New Manufacturing Firms and Regional Development: Some Evidence from the Northern Region’, Regional Studies 13, 269-280.

    Google Scholar 

  23. McFadden, D., 1974, ‘Analysis of Qualitative Choice Behavior’, in P. Zarembka (ed.), Frontiers in Econometrics, Academic Press, 105-142.

  24. McFadden, D., 1978, ‘Modelling the Choice of Residential Location’, in A. Karquist, L. Lundqvist, F. Snickars and J. Weibull (eds.), Spatial Interaction. Theory and Planning Models, Amsterdam: North-Holland, 75-96.

    Google Scholar 

  25. McFadden, D., 1984, ‘Econometric Analysis of Qualitative Response Models’, in Z. Griliches and M. Intriligator (eds.), Handbook of Econometrics, Vol. II, Elsevier Science Publishers, 1395-1457.

  26. Meester, W., 2000, ‘Locational Self-Preference of Firms’, paper presented at the 40th European Congress of the Regional Science Association, Barcelona.

  27. Mueller, E. and J. Morgan, 1962, ‘Location Decisions of Manufacturing’, American Economic Review 502, 204-217.

    Google Scholar 

  28. Palmgren, J., 1981, ‘The Fisher Information Matrix for Log Linear Models arguing Conditionally on Observed Expected Explanatory Variables’, Biometrika 68, 563-566.

    Google Scholar 

  29. Pred, A., 1967, Behavior and Location: Foundations for a Geographic and Dynamic Location Theory (Part I), Lund Studies in Geography B 27 (University of Lund).

  30. Woodward, D., 1992, ‘Locational Determinants of Japanese Manufacturing Start-Ups in the United States’, Southern Economic Journal 58, 690-708.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Arauzo Carod, J.M., Manjón Antolín, M.C. Firm Size and Geographical Aggregation: An Empirical Appraisal in Industrial Location. Small Business Economics 22, 299–312 (2004). https://doi.org/10.1023/B:SBEJ.0000022216.09083.76

Download citation

Keywords

  • Firm Size
  • Small Firm
  • Industrial Organization
  • Poisson Model
  • Disaggregate Data