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What determines entry? Evidence from Sweden

PublicationArticle (with peer review)
Företagandets villkor, Företags inträde, Humankapital, Niklas Elert

Abstract

In this paper, I examined what conditions affected the entry of Swedish limited liability firms 2000–2008, while making a distinction between regular entrants and those that survive for at least 2 years. I used a dataset that makes it possible to trace entry geographically as well as in what industry it occurs down to the 5-digit NACE level. Results suggest that the conditions influencing regular entry were similar to those influencing surviving entry. Political variables, e.g., municipal tax rate and the ideology of local rule, were of limited importance. Meanwhile, municipalities with industries with high minimum efficient scale of production or high market concentration rates were considerably less likely to see new firm formation. Substantially, more entry occurred in municipalities with high-income and a well-educated population. The importance of the level of education appears stronger for surviving entrants than for regular entrants, pointing to the importance of human capital.

Related content: Working Paper No. 195

Elert, N. (2014). What determines entry? Evidence from Sweden. The Annals of Regional Science, 53(1), 55-92. DOI: 10.1007/s00168-014-0617-1

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Economic Dynamism: Essays on firm entry and firm growth
BookPublication
Elert, N.
Publication year

2014

Abstract

The topic of this thesis is economic dynamism. The five articles contribute to the literature on firm entry and firm growth. Studies are based on a dataset covering all Swedish limited liability firms between 1997 and 2010.

The first article investigates conditions for firm entry in Sweden, distinguishing regular entrants from entrants that survive for at least two years, modelling the firm entry decision using count data models. While high income and a well-educated population had a positive effect, the effect was more important for surviving entrants. The second article uses a similar method, but focuses on wholesale industries and distinguishes between regular entry and in migration of firms, i.e. when an incumbent firm relocates its operations. Access to a university, many educated workers and low local taxes had positive effects. Better access to infrastructure had a strong positive effect on entrants, but it was smaller for in-migrating firms. The third article investigates if the industry context matters for whether Gibrat’s law holds, i.e. whether firm growth is independent of firm size. The law is found more likely to be rejected in industries with a high minimum efficient scale and a large number of firms located in metropolitan areas, but more likely to hold in industries with high market concentration and more group ownership. The fourth and fifth article contribute to the high-growth firms (HGFs) literature. In the fourth article it is examined whether the way HGFs are defined matters for the policy implications. It is found that the economic contributions of HGFs differ significantly depending on definition. Young firms are however more likely to be HGFs irrespective of definition. The fifth article considers the frequent argument that policymakers should target high-tech firms, i.e., firms with high R&D intensity, because such firms are thought more likely to become HGFs. We examine this assumption by studying the industry distribution of HGFs. Results indicate that industries with high R&D intensity, ceteris paribus, can be expected to have a lower share of HGFs than can industries with lower R&D intensity. By contrast, we find that HGFs are overrepresented in service industries with a high share of human capital.

Economic Dynamism: Essays on firm entry and firm growth
BokPublication
Elert, N.
Publication year

2014

Abstract

The topic of this thesis is economic dynamism. The five articles contribute to the literature on firm entry and firm growth. Studies are based on a dataset covering all Swedish limited liability firms between 1997 and 2010.

The first article investigates conditions for firm entry in Sweden, distinguishing regular entrants from entrants that survive for at least two years, modelling the firm entry decision using count data models. While high income and a well-educated population had a positive effect, the effect was more important for surviving entrants. The second article uses a similar method, but focuses on wholesale industries and distinguishes between regular entry and in migration of firms, i.e. when an incumbent firm relocates its operations. Access to a university, many educated workers and low local taxes had positive effects. Better access to infrastructure had a strong positive effect on entrants, but it was smaller for in-migrating firms. The third article investigates if the industry context matters for whether Gibrat’s law holds, i.e. whether firm growth is independent of firm size. The law is found more likely to be rejected in industries with a high minimum efficient scale and a large number of firms located in metropolitan areas, but more likely to hold in industries with high market concentration and more group ownership. The fourth and fifth article contribute to the high-growth firms (HGFs) literature. In the fourth article it is examined whether the way HGFs are defined matters for the policy implications. It is found that the economic contributions of HGFs differ significantly depending on definition. Young firms are however more likely to be HGFs irrespective of definition. The fifth article considers the frequent argument that policymakers should target high-tech firms, i.e., firms with high R&D intensity, because such firms are thought more likely to become HGFs. We examine this assumption by studying the industry distribution of HGFs. Results indicate that industries with high R&D intensity, ceteris paribus, can be expected to have a lower share of HGFs than can industries with lower R&D intensity. By contrast, we find that HGFs are overrepresented in service industries with a high share of human capital.

Människoapans utmaning: miljö, tillväxt och vår planets framtid
BookPublication
Elert, N.
Publication year

2014

Published in
Abstract

Mänskligheten reser sig just nu ur fattigdom och misär i en omfattning som saknar historiskt motstycke. Ekonomisk tillväxt och teknologisk utveckling har samtidigt gjort människan till en naturkraft, som sätter stora spår på planeten.

Vad händer i slutet av det här århundradet, när elva miljarder människor får samma levnadsstandard som den vi har i Sverige i dag, om inte högre? Klarar jorden det?

Budskapet i Människoapans utmaning är att ekonomisk tillväxt inte behöver vara dåligt för miljön. Tvärtom är en rikare värld på många sätt en förutsättning för en grönare tillvaro. Men det bygger på att vi förstår hur marknadsekonomin kan hjälpa oss att frigöra vår kreativitet och lära av våra misstag. Kapitalismen ger oss möjlighet att anpassa oss och åtgärda de miljöproblem vi tidigare orsakat.

Människoapans utmaning blickar mot en framtid fylld av experiment, där äganderätt, ny teknik och miljarder människoapors kreativitet räddar planeten.

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