This study shows that the survival rate of new plants depends on their spatial location. A panel dataset of French plants, observed between 1993 and 2002, provides annual samples of more than 300,000 new plants, each plant being defined as rural, peri-urban, urban or located in the Paris region. A survival model is developed, introducing the location variable alongside the usual survival determinants, such as size, industry and period. Estimation results clearly show that it is easier to create a new plant in urban areas, particularly in the Paris region, but less difficult to survive in rural ones. Agglomeration forces may explain the first result, and the intensity of local competition variable, the second. However, even once the local competition effect is controlled, rural new plants still exhibit significantly higher survival rates. The entrepreneurial theory of opportunity may help to understand such a result. The density of population, activities and information offer more opportunities to start an activity, but also to quit it once it has been created.
Small Business Economics – Springer Journals
Published: Aug 25, 2009
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