ABSTRACT. This article attemps to highlight the factors that
condition the creation of economic units of different dimen-
sions in the manufacturing industry of the Autonomous
Community of the Basque Country (CAPV) during the period
1985–93. We conclude that more establishments are created,
particularly those of a small dimension, in sectors in which
smaller economic units have a higher advantage in costs
vis-à-vis those of a larger dimension, in sectors which are
more profitable, with a larger proportion of subcontrating
firms, with a lower degree of concentration and of techno-
logical intensity and in which entities external to the firm have
a heavier wheight in R&D activities.
During the last two decades the importance
of small-sized establishments in developed coun-
tries has increased, while the importance of
larger establishments has declined. This trend is
explained by the fact that more establishments are
being created than shut down. Moreover, the
creation of establishments varies more across
sectors than within time. This could signal the
existence of sectoral specific factors (i.e. different
entry and exit barriers . . .) that have remained
relatively stable over time. It explains, as well,
why so many researchers have analysed the
industry specific factors that condition the creation
of new establishments.
This paper analyses the quantitative effect of
various factors on the rates of enterprise entry. The
identification of the variables which determine the
rate of entry is relevant, as a higher rate of entry
increases market competition and avoids high
concentrated market structures, generates innova-
tions and contributes to reduce one of the last
years main problem: the unemployment.
The trend towards the expansion of small-sized
establishments and the decline of larger ones
has also been experienced in the Autonomous
Community of the Basque Country
CAPV) [see Aranguren (1997a)]. In this paper we
will attempt to identify the factors that have
determined the creation of economic units in the
manufacturing industry of the CAPV during the
2. Data issues: entries
The data used in this paper has been provided by
The good quality of the Eustat’s Industrial
Directory, Industrial Survey and R&D Statistics as
well as the facilities provided by this Institute
carry out specific analyses with data at the level
of establishment led us to limit the scope of this
study to the CAPV.
On the other hand, this study is centred in the
manufacturing industry, not only due to data
availability but also due to its singularity and
relevance to the economy as a whole.
unit of analysis used in this study is the
establishment for data provided by the industrial
directory and the industrial survey, and the firm
for data provided by the survey in R&D. This does
not generate a significant bias in the analysis.
Let us point out also that in this paper, the
entrants are classified by their size. The reason is
that the entry difficulties in a sector could vary
with the size of the entrant.
The criterion used to
Determinants of Economic Units Creation
in the Period 1985–93: The Case of
the Manufacturing Industry in CAPV
Mari Jose Aranguren
Small Business Economics 12: 203–215, 1999.
1999 Kluwer Academic Publishers. Printed in the Netherlands.
Final version accepted on July 13, 1998
Universidad De Deusto
Facultad De Ciencias Economicas
Mundaiz 50 San Sebastian