The impact of individual characteristics and regional agglomeration on the survival of self-employed firms

Abstract

Self-employed firms are known to have a very high mortality rate. The literature on the success of firms offers several explanations. I attribute the firm's survival to internal and external factors by relying on the resource-based view and agglomeration economies, respectively. This paper aims at investigating whether individual characteristics of the founding entrepreneur and agglomeration economic variables (urbanization, related and unrelated variety, and specialization) have a significant impact on the survival of self-employed firms. Tracing the cohorts of newly established firms in Sweden from 1990 to 2010, I conclude that: (i) firms face a greater mortality rate when entrepreneur's age increases, entrepreneurs are female, or immigrant, even after controlling for industry heterogeneity, (ii) the survival of firms with female entrepreneur is lower in the manufacturing sector whereas immigrant firms has a lower survival in knowledge-intensive sector, (iii) highly educated entrepreneurs are more likely to survive in services and knowledge-intensive business sectors, and (iv) self-employed firms barely benefit from agglomeration economies.