Extending a Smooth Parameter Model to Firm Location Analyses: The Case of Natural Gas Establishments in the United States

Abstract

This paper extends recent developments in regional growth modeling that use spatial regime switching functions to a count regression model of firm location events. The smooth parameter count model (SPCM) allows for a parsimonious parameterization of locally varying coefficients while simultaneously attending to excess‐zero count events. An empirical application examines natural gas establishment growth between 2005 and 2010. The smooth parameter model appears to outperform a standard zero‐inflated count model. The SPCM may be extended to the location analysis of other industries with the identification of transition variables related to the supply or demand oriented cost structure of the sector.