Exploring the Role of Location in Dynamics of the Birth and Death of Business Establishments: Case Study Analysis of Santa Barbara County, California

Abstract

Integrated models of land use and transportation are aimed at addressing regional issues related to congestion, mobility, and economic competitiveness. Integral to these model systems is freight transport, which plays a huge role in the economic vitality of the region in the form of distribution and complex interactions between various stakeholders. Within this context, it is therefore critical to capture and describe accurately the behavioral dynamics of these stakeholders (or firms) in the region, including modeling various life-cycle stages, such as birth, death, growth and decline, and migration patterns. This study focused on dynamics of the birth and death of firms by considering as determinants their internal attributes (size, age, and growth) and external attributes, such as market area characteristics, agglomeration economies, transportation access, and network centrality indexes describing advantage, significance, and properties of a location. This microanalysis was based on an assembled panel of all business establishments in Santa Barbara County in California between 1990 and 2010. Empirical results from this study revealed the presence of spatial and temporal heterogeneity in the birth and death of firms. Highly central locations in the region, such as downtown areas, have a higher probability of firm formation, along with a lower likelihood for firm closures. Professional service firms located along major local and collector roads have higher probabilities of survival. In addition, for their economic survival, retail trade firms favor access to locations along roadways that serve as pass-through connectors in the region. Results also suggest that events of birth and death are triggered primarily by changes in firm internal attributes, such as employment size, revenues, and growth rates.