Agglomeration and New Establishment Survival: A Mixed Hierarchical and Cross-Classified Model

36 Pages Posted: 19 May 2010

See all articles by Martijn J. Burger

Martijn J. Burger

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM)

Frank G. van Oort

University of Utrecht

Otto Raspe

affiliation not provided to SSRN

Date Written: 28 2010 4,

Abstract

Recent empirical studies in regional science and urban economics show that agglomeration economies may be one source of the uneven distribution of economic activities and economic growth across cities and regions. At the same time, the body of research into the importance of agglomeration economies for the performance of firms is still growing. Such development is necessary, as the theories that underlie agglomeration economies are microeconomic in nature, but still insufficiently understood. In this study, we focus on the determinants of survival among new establishments in the advanced producer services sector in the Netherlands. Employing a mixed hierarchical and cross-classified probit regression, we introduce a model of establishment survival that is specific to characteristics of the internal and external environment of the establishment. Controlling for firm and sector characteristics, we conclude that location accounts for about 4% of the variance in the probability of survival of new establishments. We also find that localization and urbanization economies have a positive effect on the survival of new establishments. However, new establishments with large start-up sizes appear to profit more from agglomeration economies than new establishments with small start-up sizes.

Keywords: agglomeration economies, micro-macro link, new establishments, multi-level analysis

JEL Classification: M13, O32, M, R11, O10

Suggested Citation

Burger, Martijn J. and van Oort, Frank and Raspe, Otto, Agglomeration and New Establishment Survival: A Mixed Hierarchical and Cross-Classified Model (28 2010 4,). ERIM Report Series Reference No. ERS-2010-018-ORG, Available at SSRN: https://ssrn.com/abstract=1611525

Martijn J. Burger (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

Burg. Oudlaan 50
Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Frank Van Oort

University of Utrecht ( email )

Vredenburg 138
NL-3508 TC Utrecht, 3511 BG
Netherlands

Otto Raspe

affiliation not provided to SSRN

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