Abstract
New firm formation is an important determinant of regional development. Entrepreneurial decisions on location choice are affected by numerous factors. Given the importance of local regional characteristics, this study focuses on the dynamics behind the regional formation of new firms in Turkey using balanced panel data from 1997 to 2006. An initial set of analyses underline the ongoing persistence of the unequal distribution of new firms. Among various factors, results obtained from different panel models suggest the importance of local demand, provincial business cycles, human capital development, and financial availabilities to explain the regional differences of new firm formation in Turkey. These results, which are robust to the inclusion of spatial links, also confirm that the proposed channels are common for manufacturing, services, and trade‐based production.
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