Abstract
With the continuing shift toward e-commerce, physical business locations with a brick-and-mortar presence become an endangered element of urban fabric, land use, and the local economy. City governments and local municipalities have created and implemented a variety of strategies and incentives to stimulate new business activity within their jurisdictions. A policy of enhancing the business climate is productive in some regions but not in others. To understand these variations in outcomes, this research focuses on examining the relationship between the uniqueness of certain regions, spatially bounded characteristics, and how both affect where new establishments locate. A two-level model is introduced to employ the census tract as a spatial unit of analysis and analyzes new establishments within 27 medium-sized metropolitan statistical areas in the United States. That quantitative model allows this study to determine key regional and neighborhood factors, as well as the existence of previously unmeasured factors, influencing location decisions of new establishments. The results of this study confirm the importance of economic, demographic, and geographic conditions at the neighborhood level, providing a better understanding of the vulnerability of the local economy.
Highlights
Every city and town attempts to attract new businesses to support job creation and affect the health of the community
To observe the effects of the two levels, the metropolitan statistical area (MSA)-level variables and census tract level variables are derived by accounting for theoretical debates and prior empirical findings
Since local markets are associated with neighborhood conditions, neighborhood factors are more influential for local businesses than regional factors
Summary
Every city and town attempts to attract new businesses to support job creation and affect the health of the community. New business establishments do that by creating jobs, disseminating ideas, and potentially drawing additional businesses. Start-ups create far more jobs than incumbent firms. Between 1977 and 2005 in the United States (U.S.), start-ups created an average of three million new jobs annually, whereas existing firms eliminated, on average, one million jobs per year [1]. New businesses are regarded as the economic engine of regional growth. Start-up activities differ across regions and across neighborhoods within a region. The purpose of this study is to examine what determines spatial variation in new firm formations
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