The Distribution of Firm Start-Up Size across Geographic Space
David B. Audretsch
Indiana University - Institute for Development Strategies; King Saud University; WHU - Otto Beisheim School of Management; Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)
Jagannadha Pawan Tamvada
Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; University of Goettingen (Gottingen)
CEPR Discussion Paper No. DP6846
A growing body of literature shows that geographic location plays an important role in influencing economic phenomena. Despite the renewed interest in economic geography, the existing literature on the firm size distribution (FSD) has ignored the impact of geographic location. A wave of recent studies has examined the determinants and evolution of FSD (Cabral and Mata, 2003; Angelini and Generale 2008, AER) and a component of this literature has focused on the size of the new firm start-ups. However, while the impact of firm-specific and industry-specific characteristics on size of new firms has been analyzed, the role of geographic location has been largely neglected. Using Bayesian semi-parametric geoadditive models, we estimate geographic location as a micro-determinant of firm start-up size. The estimations based on a comprehensive database of firm start-ups in India suggest that the size distribution of new firms exhibits distinct regional patterns, even after controlling for firm and industry characteristics. These residual spatial patterns are found to be attributable, to some extent, to the level of economic and financial development in the regions.
Number of Pages in PDF File: 30
Keywords: Bayesian Methods, Developing Countries, Firm Size Distribution, Geoadditive Models, Geography, Start-Up Size
JEL Classification: L11, L60, R12
Date posted: June 17, 2008
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