Firm Demography Research Articles

An Overview of Investigations Concerning Agglomerations in Regional Economy

The concentration of organisations in a city or region allows companies to receive benefits without additional costs and increase their productivity. It has been empirically proven that urbanisation and localisation effects of agglomerations contribute to economic growth and development, and therefore should be taken into account in regional and urban policies. The article considers the factors of agglomeration formation, their specific development and impact on the economy of regions and cities. The paper examines studies on the territorial distribution of companies and the population, including creative capital, showing the connection with innovative systems and knowledge capital. The research demonstrates how international trade, market competition, the transport system development and many other factors affect agglomerations. The study of agglomeration processes intersects with other fields of science, such as evolutionary economics, cluster organisation, specialisation and diversification, demography of firms. To cover the topic, works in the field of agglomeration processes were systematised by using time-domain, terminological and geographical analysis, as well by studying definitions and typology, based on data obtained from Google Scholar and Web of Science for 1959–2018. It is revealed that agglomerations are considered in such scientific fields as economics, geography, regional urban planning, urban studies, management and regional studies. The key terms are agglomeration economy (economics), localisation, urbanisation, agglomeration forces, agglomerative and deglomerative factors. These works are geographically distributed, and most of them are conducted in the USA (mainly at the University of California), Great Britain (London School of Economics and Law) and China (Chinese Academy of Sciences and Peking University). The presented research review will serve as a starting point for a more in-depth study of agglomeration processes in various fields of economics.

Agent-based modelling of office market for a land use and transport model

This paper proposes an agent-based office market model, as a component of a Land Use and Transport (L-T) model, SelfSim, to simulate how firms and office buildings co-evolve over time. Essentially, the office market model is involved in both firm demography and office building development: the firmographic model is capable of simulating four typical events, namely, firm birth, growth, relocation and closure; the office building development model is to simulate how facility agents develop office buildings, according to the demand from firms, which is associated with the firm demography. The office market model was tested within theoretical examples set up based on a Chinese medium-sized city, Baoding: both global and local Sensitivity Analyses (SAs) were conducted to explore how the twenty seven key model parameters could influence the thirteen model outputs of interest, identifying five influential parameters. Finally, some specific spatially disaggregate model results were presented.

Using QCA to explain firm demography in the European Union

Entrepreneurship is currently considered one of the major foundations of economic growth. There is a strong tendency to understand entrepreneurship as technology, self-employment, new ideas, innovation, or wealth creation. We can thus expect more developed countries to show higher growth rates, given the importance of firms' development for economic and social growth. For this reason, it is important to determine the conditions that have the greatest influence on entrepreneurship dynamics at the macroeconomic level. Using firm birth and death rates (related to business dynamics and entrepreneurship), we focus on the European Union and use qualitative comparative analysis techniques to determine the necessary and sufficient conditions for business dynamics. After dividing the whole EU sample into cohesion and non-cohesion countries, we find that entrepreneurship in cohesion countries is driven by necessity, while in non-cohesion countries, it is driven by opportunity.

The Schumpeter creative destruction hypothesis: a spatial assessment on Portuguese regions

Shumpeter characterised the innovative role of the entrepreneur on economic growth (Schumpeter, 1942). By inventing new products, new processes or techniques, the entrepreneur searches for monopoly rents and forces the social and economic structure to evolve. The routines, characterised by accommodative behaviour, which may endure for long periods are suddenly broken, in a sequence of stagnation and evolutionary periods (Schumpeter, 1947). Therefore, according to the Schumpeter theory, innovation is at the core of economic growth, and goes further as it causes social and economic structural changes. The present article leads on with an empirical assessment about the Schumpeter creative destruction hypothesis at the Portuguese Regional level, using a spatial econometric framework, based on Elhorst (2003) and Bhattacharjee et al. (2012). We estimate a model with spatial fixed effect, exploring the relation between R&D intensity at the firm level, productivity and firm demography dynamics, using a panel data for the 28 Portuguese continental NUTsIII regions between 2006 and 2009. The results obtained confirm the association between productivity and firm demographic dynamics – i.e., regions with higher level of productivity present also higher rates of birth and mortality among firms. We have not found, as it would be predictable according to the Schumpeter hypothesis, statistical evidence of association between productivity and R&D intensity at the firm level. This result indicates that Portuguese firms behaviour is more of imitation rather than innovation.

Tecido empresarial algarvio: Demografia, crescimento e sobrevivência

This paper offers a two decades´ (1985-2007) perspective of employer enterprises´ demography dynamics in the Portuguese region of the Algarve. Departing from the NUTII regional disaggregation, this region´s firm demography is further broken down by sector, size and growth intensity, during the analysis of firm creation, employment, high-growth firms, longevity and survival probability. By 2007, only three NUTII regions displayed a rate of firm creation above the national average, with Algarve being the region in the country with the highest rate of firm creation, after the year 2000. Algarve also displays the highest rate of growth of employer enterprises, suffering however from considerable firm turbulence due to its high share of SME. These findings are related to the regional specialization model, as Algarve´s firms have been shown to be increasingly concentrated in the services and construction sectors throughout the period.

A spatial analysis of health and pharmaceutical firm survival

ABSTRACTThe presence of knowledge spillovers and shared human capital is at the heart of the Marhall–Arrow–Romer externalities hypothesis. Most of the earlier empirical contributions on knowledge externalities; however, considered data aggregated at a regional level so that conclusions are based on the arbitrary definition of jurisdictional spatial units: this is the essence of the so-called modifiable areal unit problem. A second limitation of these studies is constituted by the fact that, somewhat surprisingly, while concentrating on the effects of agglomeration on firm creation and growth, the literature has, conversely, largely ignored its effects on firm survival. The present paper aims at contributing to the existing literature by answering to some of the open methodological questions reconciling the literature of Cox proportional hazards model with that on point pattern and thus capturing the true nature of spatial information. We also present some empirical results based on Italian firm demography data collected and managed by the Italian National Institute of Statistics (ISTAT).

Firm Demography and Regional Development: Evidence from Italy

This article contributes to the literature on firm demography and regional development in at least three different ways. First, consumption, rather than employment, which is the most common variable seen in literature, is used to measure the impact of firm demography on regional development. Second, while the literature is mainly focused on the relationship between new business formation and regional development, we investigate both entry and exit flows of firms. Third, we decompose each of these flows into spatial and sectoral components. The empirical investigation looks at the Italian regions with reference to the period 2004–2009. Results seem to be substantially divergent between the South and the rest of Italy.

How did geese fly domestically? Firm demography and spatial restructuring in China's apparel industry

Using a firm‐level database from 1999 to 2008, this paper sheds new light on the industrial dynamics of China's clothing industry, highlighting the multi‐scalar process of spatial restructuring primarily driven by differences in the rate of job creation, especially through start‐up firms. At the inter‐provincial level, 2004 represents a turning point where the industry ceased to be concentrated in coastal areas and began to relocate inland, especially to central provinces. At the intra‐provincial level, cities in coastal provinces remained the most attractive locations for start‐up companies even after 2004. The results suggest that the regionally decentralised authoritarian regime, intertwined with market forces shaping the multi‐scalar process of spatial restructuring, is pivotal to understanding the changing geography of China's apparel industry.

The Long-Term Impact of Foreign Multinational Enterprises in Spain: New Insights into an Old Topic

The role of foreign capital and technology in the economic and social progress of late-developing countries remains a controversial issue in both academic and policy circles. In this essay, we examine the case of Spain in the light of the academic literature from the 1960s to the present. First, we identify and contextualize the intellectual concerns and controversies of two important generations of economists and historians and their approaches to the specific issue of multinational enterprises (MNEs). We then discuss what we consider to be the seven major contributions of recent Spanish scholarship in terms of: 1/ new quantitative evidence on FDI inward flows and firm demography analyses of foreign MNEs; 2/ new approaches to the transfer of technology by MNEs; 3/ collective and individual case studies of foreign MNEs, with a focus on their impact on local capabilities; 4/ identification of patterns of investment by MNE home countries; 5/ identification and study of the local actors of inward FDI; 6/ new perspectives gained from the history of international relations; and 7) new evidence on processes leading from inward FDI to outward FDI. We argue that the time is ripe for comprehensive re-assessments of the long-term impact of foreign MNEs and the role of Spain in the global economy.

Spatio-temporal clustering in the pharmaceutical and medical device manufacturing industry: A geographical micro-level analysis

The study of the geographical distribution of firms and of the dynamic pattern of firm entry and firm exits is a particularly relevant issue in regional health economics especially in the view of policy intervention to geographically balance health service supply and demand. The current state of the art in the study of new firm formation and firm exit (see, e.g., Armington and Acs, 2002; Folta et al., 2006; Andersson and Koster, 2011; Raspe and van Oort, 2011) collects a comprehensive set of empirical methodologies for data aggregated at the macro- (national) or meso- (e.g. regional) territorial levels, in which observations typically consist of the administrative units (such as regions, counties and municipalities). The lack of a systematic approach to the analysis of data at the micro-territorial level — where the observations refer to the geographical coordinates of each individual firm — has dramatically limited the possibility to obtain robust evidences about firm demography phenomenon mainly due to a problem of data scarcity and reliability. To overcome such limitations, in this article we propose an approach to the analysis of the spatial dynamics of firm formation/exit based on micro-geographic data. In particular, we illustrate the use of the space–time inhomogeneous K-function (Gabriel and Diggle, 2009) to detect the spatio-temporal clustering of firm entries and firm exits generated by the interaction between economic agents while controlling for common (locally varying) factors, spatial and temporal heterogeneity. In view of our aim the present paper shows the results of an empirical application of the methodology to the case of new firms entry and firm exit in the pharmaceutical and medical device manufacturing industry during the years 2004–2009 in an Italian region (Veneto).

A micro spatial analysis of firm demography: the case of food stores in the area of Trento (Italy)

The potential offered by the increasing availability of micro-geographic data is tremendous and still largely not exploited. In this paper, we propose a new methodology to study the spatial dynamics of firm demography making use of such rich source of information. Exploiting the techniques of stochastic spatial point processes (Diggle, Statistical analysis of spatial point patterns, 2003), it is indeed possible to model the firm birth, growth and death explaining the behavior of the individual economic agent. We consider the spatial distribution of the economic activities as the result of a dynamic process occurring in space and time, and we model the micro-spatial patterns as single realizations of marked space–time survival point processes (Rathbun and Cressie, J Am Stat Assoc 89:1164–1174, 1994). Within such a methodological framework firms are created at some random location and some point of time and then operate, grow, and attract (or repulse) the localization of other firms in their neighborhood. The proposed model is fitted to some empirical data on firms’ locations sourced from the ASIA harmonised archive of the Italian National Institute of Statistics. The empirical analysis reveals the presence of local competition behavior in firm creation among small retail food stores, thus shedding light on the phenomena of firm demography.

What Has Been the Impact of the 2008 Crisis on Firmss Default?

The acceleration of the firm failure rate in France between 2008 and 2010 was preceded by a surge in the number of firms’ creations in 2003-2004. Therefore, identifying the impact of the 2008 crisis requires to distinguish, among the failures occurring over the period, those resulting from the crisis from hose mechanically stemming from firm demography, as we know that many firms disappear during their first years of existence. Our study was conducted using the universe of firms created between January 1, 2000 and December 31, 2007. This sample is extracted from the database managed by the Companies Direction at Banque de France. The lack of complete information on firms created before 2000 led us to restrict the sample to newly created firms, but the period under study is long enough to encompass the increase in the number of firm creation in 2003-2004. The originality of this study lies both in the sample size and in the richness of the data used. Our statistical analysis focuses on the period between the date of the firm creation and of its first failure. The impact of the crisis is estimated using a flexible duration model, stratified according to the date of creation. The model takes into account the effects of the company age at the failure date, its industry, its size and the sequence of dates associated with its payment incidents on trade bills. We examine more specifically the failure rates in four industries: retail trade, transport, manufacturing and construction. The proportion of failures due to the crisis varies greatly across these four sectors. On average, the impact of the 2008 crisis has been of 27% in retail trade, 35% in transports, 43% in manufacturing and 46% in construction. Younger firms, namely those created in 2006 and 2007, were the most affected by the crisis.

Europe's missing Yollies

Résumé La faible capacité de l’Europe à générer de la croissance, en particulier la croissance de sa productivité, est en grande partie attribuable à sa faible capacité innovatrice. Les politiques visant à augmenter la croissance par le biais de la recherche et développement (R&D) n’ont pas tenu toutes leurs promesses. L’intensité R&D privée demeure jusqu’à présent faible (et la croissance de la productivité a diminué). Parmi les causes potentielles pouvant expliquer ces performances modestes, plusieurs analyses ont montré l’importance de la spécialisation sectorielle ainsi que la démographie des entreprises, en particulier le niveau d’entrée et de sortie des firmes. Dans cet article, nous allons plus loin en établissant un lien entre ces deux dimensions. Nous montrons que le déficit d’intensité R&D entre l’UE et les États-Unis peut quasiment entièrement s’expliquer par la présence beaucoup plus faible en Europe de jeunes grandes entreprises innovantes, notamment dans les nouveaux secteurs à haute intensité technologique. L’article propose une discussion des implications de ces résultats sur la recherche en Europe ainsi qu’en matière de conception et de mise en œuvre de politiques d’innovation. JEL : L11, 047, 057

Crossroads of family business research and firm demography—A critical assessment of family business survival rates

Do family firms rise and decline in three generations? Not only since Thomas Mann's “The Buddenbrooks” has the survival rate of family firms intrigued family business scholars, practitioners and consultants. In this article, we trace the family firm survival rate to its roots and discuss its empirical basis and univocal reading. We then ask how the mortality of family businesses could be measured, and which contextual factors need to be taken into account. To this end we explore the literature on firm demography, a field which is particularly concerned with age and mortality, and identify crossroads with family business studies. We conclude by suggesting a re-conceptualization of survival rates within a larger firm demographic research framework.

Size, innovation and internationalization: a survival analysis of Italian firms

Firms’ survival is often seen as crucial for economic growth and competitiveness. This article focuses on business demography of Italian firms, using an original database, obtained by matching and merging to gain the intersection of three firm level datasets. This database allows us to simultaneously consider the effect of size, technology, trade, FDIs and innovation on firms’ survival probability. We show that size and technological level positively affect the likelihood of survival. Internationalized firms show higher failure risk: on average competition is stronger in international markets, forcing firms to be more efficient. However, large internationalized firms are more likely to ‘survive’. An Italian internationalized firm to be successful and to survive, should be high-tech, large and innovative.

Detecting the existence of space–time clustering of firms

The use of the K-functions (Ripley, 1977) has recently become popular in the analysis of the spatial pattern of firms. It was first introduced in the economic literature by Arbia and Espa (1996) and then popularized by Marcon and Puech (2003), Quah and Simpson (2003), Duranton and Overman (2005), and Arbia et al. (2008). In particular in Arbia et al. (2008) we used Ripley's K-functions as instruments to study the inter-sectoral co-agglomeration pattern of firms in a single moment of time. All this research has followed a static approach by disregarding the time dimension. Temporal dynamics, on the other hand, play a crucial role in understanding the economic and social phenomena particularly when referring to the analysis of the individual choices leading to the observed clusters of economic activities. With respect to previous contributions to the literature, this paper uncovers the process of firm demography by studying the dynamics of localization through space–time K-functions. The empirical part of the paper will focus on the study of the long run localization of firms in the area of Rome (Italy), by concentrating on the Information and Communication Technology ( ICT) sector data collected by the Italian Industrial Union in the period 1920–2005.

New spatial econometric techniques and applications in regional science

The papers appearing in this special issue of Papers in Regional Science, which is devoted to spatial econometrics, come from the First International Conference of the Spatial Econometrics Association held in Cambridge (UK) 12-14 July 2008. This conference was the first official meeting of the new association, which was established in May 2006 in Rome and which has already attracted more than 150 members from around the world. At the Cambridge conference there were close to 120 delegates and more than 100 papers were presented. With regard to the eight papers appearing in this special issue, we would particularly like to thank the authors and the referees for their contribution to what we believe is an interesting and lively selection. Recent years have seen a real explosion in the application of spatial statistical models in all branches of social sciences and in particular in economics. Spatial econometrics models have been used to analyse different topics (see for example Anselin et al. 2004 for a review) and as a matter of fact spatial regression techniques are now becoming an established component in the applied econometrics toolbox, as witnessed by the increasing attention given to this topic in standard econometrics textbooks (Maddala 2001; Woolridge 2002; Gujarati 2003; Kennedy 2003; Baltagi 2008).

Firm Productivity Dynamics in Spain

We have constructed a new database aimed at the study of the relation between firm demography and labour productivity, with a large number of Spanish firms from both industry and service sectors. This database allows us to analyze in detail the degree of dispersion and persistence of productivity levels, as well as the contribution of firm demography to productivity growth. This analysis has been done at different levels of sector aggregation. We have also studied explicitly the differential role of small and large firms.

Sectoral and cross-sectoral effects of retailing firm demographies

Firm births and deaths are interrelated. Johnson and Parker (1994) have summarized the various causality relationships according to three different effects: (1) the Multiplier, (2) the Competition and (3) the Marshall effect. This article proposes an enlarged analytical framework by introducing the sectoral and cross sectoral dimensions of firm demography. The expected interrelationships between firm births and deaths are different when studied within a single industry, or between different industries. In the first case, Competition effects should prevail while, in the second case, Multiplier effects are more probable. The discussion suggests, however, that even for firms with similar activities, complementarities and Multiplier effects may occur. An econometric model that allows for (cross-)sectoral and spatial interactions is specified and tested using Belgian data. Results lead to the conclusion that sectoral and cross-sectoral dimensions in firm demography are relevant. It is also clear that these issues definitely deserve further attention in firm demographic research.

A SEARCH MODEL OF UNEMPLOYMENT AND FIRM DYNAMICS

An urn-ball probabilistic model of the labor market is developed. Agents can be employed (voluntarily or involuntarily) unemployed, or entrepreneurs. The analytical long-run equilibrium probabilities for each state and the matching function are derived. In equilibrium, a higher reservation wage increases the number of start-ups, but has an overall negative impact on the unemployment rate. A more buoyant economy (higher average growth rate and higher average wages) is shown to be associated with a lower unemployment rate. Higher start-up costs discourage entrepreneurship and increase unemployment. More active search behavior leads first to a decrease in the unemployment rate, and then to a small increase, due to increased coordination failure induced by the higher number of applications sent by job seekers. The out-of-equilibrium dynamics are investigated through an agent-based simulation, which also provides results on firm demography. Important empirical regularities such as the Beveridge and the Okun curve are recovered. Finally, the simulation model is used to investigate departures from maximizing individual behavior and the effects of more realistic assumptions about profits and the business cycle.