Spatial Heterogeneity, Broadband, and New Firm Formation

Jitendra Parajuli,Kingsley Haynes

doi:10.12776/qip.v20i3.791

Abstract

Purpose: This paper examines the spatial heterogeneity associated with broadband Internet and new firm formation in a number of U.S. states.Methodology/Approach: Both ordinary least-squares regression and Geographically Weighted Regression are used for the estimation purpose.Findings: The global coefficient estimates of ordinary least-squares regression account for the marginal change in a phenomenon, but such a global measure cannot reveal the locally-varying dynamics. Using Geographically Weighted Regression, it was found that at the aggregate and economic sector levels, the association between single-unit firm births and the provision of broadband Internet varies across counties in Florida and Ohio.Originality/Value of paper: There are numerous studies on broadband Internet in the U.S., but this is the first that explicitly examines broadband provision and new firm formation by taking into account spatial heterogeneity across countries.

Highlights

Both hard and soft infrastructure (Haynes, 2006) are capital stocks of a nation or region (Nijkamp, 1986; Prud’homme, 2005) and generally impact economic growth and development positively
Total new firm births in each sampled state were disaggregated by the 2-digit North American Industry Classification System (NAICS) codes and the same set of hypotheses was tested for the manufacturing (NAICS 31-33), finance and insurance (NAICS 52), and real estate and rental and leasing (NAICS 53) sectors
This paper examined spatial heterogeneity in relation to broadband Internet and new firm formation using Geographically Weighted Regression (GWR) models

Summary

BACKGROUND

Both hard and soft infrastructure (Haynes, 2006) are capital stocks of a nation or region (Nijkamp, 1986; Prud’homme, 2005) and generally impact economic growth and development positively. A real-time, collaborative environment helps to generate new capabilities, markets, and strategies that are important for growth (Austin and Bradley, 2005) and network (see Katz and Shapiro, 1985) and scale effects (see Arthur, 1990) increase the utility and value of a network. Since its commercialization, the Internet has offered virtual business models, such as Amazon.com, Craiglist, and eBay, and compelled traditional businesses like Walmart, Toys R Us, Walgreens, Dell, and FedEx to adopt Webbased strategies for sales and services (Bakos, 1998; Griffith and Krampf, 1998). This paper proposes that because the Internet offers various business possibilities, entrepreneurs that render innovation into economic opportunities (Schumpeter, 1942) are likely to be attracted to regions that have broadband Internet infrastructure. While the OLS estimates will give the global relationship, the GWR estimates will provide the local relationship for counties embedded in states

LITERATURE REVIEW AND RESEARCH HYPOTHESES

RESEARCH DESIGN AND DATA A global multiple regression model is given as:

EMPIRICAL FINDINGS

CONCLUSION