Skip to main content
SpringerLink
Log in

Explaining Firm Employment Growth: Does Location Matter?

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

This paper addresses the question to what extent the location of a firm can be regarded as having an influence on the performance of a firm as measured by employment growth. While in theory it is widely acknowledged that `location' should be considered as a relevant growth determinant, empirical research has so far mainly focused on firm-internal factors. The question raised in this paper is empirically verified by means of an econometric model based on a data set of circa 35,000 establishments located in the northern part of the Netherlands during the period 1994–1999. The model includes several measurements of location characteristics like the population level and growth, employment growth, spatial specialisation and cluster indicators, type of enterprise zone, and accessibility while controlling for firm-associated factors such as size, age, and business activity. Based on the fact that we find several significant coefficients we conclude that `location matters' but that the effect differs by type of economic activity.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Almus, M. and E. A. Nerlinger, 1999, ‘Growth of New Technology-based Firms. Which Factors Matter?’, Small Business Economics 13(2), 141-154.

    Google Scholar 

  • Almus, M. and E. A. Nerlinger, 2000, ‘Testing “Gibrat's Law” for Young Firms. Empirical Results for West Germany’, Small Business Economics 15(1), 1-12.

    Google Scholar 

  • Anselin, L., 1995, SpaceStat. A Software Program for the Analysis of Spatial Data, Version 1.80, Morgantown: Regional Research Institute, West Virginia University.

    Google Scholar 

  • Armstrong, H. and J. Taylor, 1993, Regional Economics and Policy, 2nd edition, New York [N.Y. etc.]: Harvester Wheatsheaf.

    Google Scholar 

  • Audretsch, D. B., 1998, ‘Agglomeration and the Location of Innovative Activity’, Oxford Review of Economic Policy 14(2), 18-29.

    Google Scholar 

  • Audretsch, D. B., L. Klomp and A. R. Thurik, 1999, ‘Do Services Differ from Manufacturing? The Post-entry Performance of Firms in Dutch Services’, in D. B. Audretsch and A. R. Thurik (eds.), Innovation, Industry Evolution and Employment, Cambridge [etc.]: Cambridge University Press, pp. 230-252.

    Google Scholar 

  • Barkham, R., G. Gudgin, M. Hart and E. Hanvey, 1996, The Determinants of Small Firm Growth. An Inter-regional Study in the U.K. 1986–1990, London [etc.]: Kingsley.

    Google Scholar 

  • Bartels, C. P. A., 1979, ‘Operational Statistical Methods for Analysing Spatial Data’, in C. P. A. Bartels and R. A. Ketellapper (eds.), Exploratory and Explanatory Statistical Analysis of Spatial Data, Boston [etc.]: Martinus Nijhoff, pp. 5-50.

    Google Scholar 

  • Birch, D., 1979, The Job Generation Process, Cambridge, MA [etc.]: MIT Press.

    Google Scholar 

  • Boarnet, M. G., 1994, ‘An Empirical Model of Intrametropolitan Population and Employment Growth’, Papers in Regional Science 73(2), 135-152.

    Google Scholar 

  • Borts, G. H. and J. L. Stein, 1964, Economic Growth in a Free Market, New York [etc.]: Colombia Univ. Press.

    Google Scholar 

  • Boswell, J., 1972, The Rise and Decline of Small Firms, London: George Allen and Unwin.

    Google Scholar 

  • Brixy, U. and S. Kohaut, 1999, ‘Employment Growth Determinants in New Firms in Eastern Germany’, Small Business Economics 13(2), 155-170.

    Google Scholar 

  • Brüderl, J., P. Preisendörfer and R. Ziegler, 1996, Der Erfolg Neugegründeter Betriebe. Eine Empirische Studie zu den Chancen und Risiken von Unternehmensgründungen, Berlin: Duncker and Humblot.

    Google Scholar 

  • Bruno, A. V. and T. T. Tyebjee, 1982, ‘The Environment for Entrepreneurship’, in C. A. Kent, D. L. Sexton and K. H. Vesper (eds.), Encyclopedia of Entrepreneurship, Englewood Cliffs, N.J.: Prentice-Hall, pp. 288-307.

    Google Scholar 

  • Callejon, M. and A. Segarra, 1999, ‘Business Dynamics and Efficiency in Industries and Regions: The Case of Spain’, Small Business Economics 13(4), 253-271.

    Google Scholar 

  • Carlino, G. A. and E. S. Mills, 1987, ‘The Determinants of County Growth’, Journal of Regional Science 27(1), 39-54.

    Google Scholar 

  • Davidsson, P., 1989, Continued Entrepreneurship and Small Firm Growth, Stockholm: School of Economics, The Economic Research Institute.

    Google Scholar 

  • De Groot, H. L. F., P. Nijkamp and Z. J. Acs, 2001, ‘Knowledge Spill-overs, Innovation, and Regional Development — Introduction Special Issue’, Papers in Regional Science 80(3), 249-253.

    Google Scholar 

  • Duranton, G. and D. Puga, 2000, ‘Diversity and Specialisation in Cities. Why, Where and When Does It Matter?’ Urban Studies 37(3), 533-555.

    Google Scholar 

  • Evans, D. S., 1987, ‘Test of Alternative Theories of Firm Growth’, Journal of Political Economy 95(4), 657-674.

    Google Scholar 

  • Gordon, I. R. and P. McCann, 2000, ‘Industrial Clusters: Complexes, Agglomeration and/or Social Networks?’, Urban Studies 37(3), 513-532.

    Google Scholar 

  • Havnes, P. and K. Senneseth, 2001, ‘A Panel Study of Firm Growth among SMEs in Networks’ Small Business Economics 16(4), 293-302.

    Google Scholar 

  • Hayter, R., 1997, The Dynamics of Industrial Location. The Factory, the Firm and the Production System, Chichester [etc.]: Wiley.

    Google Scholar 

  • Johnson, P., C. Conway and P. Kattuman, 1999, ‘Small Business Growth in the Short Run’, Small Business Economics 12(2), 103-112.

    Google Scholar 

  • Krugman, P., 1991, Geography and Trade, Cambridge [etc.]: MIT Press.

    Google Scholar 

  • McDermott, P. J. and M. J. Taylor, 1982, Industrial Organisation and Location, Cambridge: Cambridge University Press.

    Google Scholar 

  • Meurs, H., 1993, Het GTI-model, Amersfoort: MU-Consult.

    Google Scholar 

  • Neary, J. P., 2001, ‘Of Hype and Hyperbolas: Introducing the New Economic Geography’, Journal of Economic Literature 39(2), 536-561.

    Google Scholar 

  • Poot, A.P., N.M. Brouwer, J. Ouwersloot, P. Rietveld, 1997, Innovatie in de Regio. Provinciale Innovatieprofielen, Amsterdam: Stichting voor Economisch Onderzoek.

    Google Scholar 

  • Pellenbarg, P. H., L. J. G. van Wissen and J. van Dijk, 2002, ‘Firm Migration’, in P. McCann (ed.), Industrial Location Economics, Cheltenham: Edward Elgar, pp. 110-148.

    Google Scholar 

  • Rauch, J. E., 1993, ‘Productivity Gains from Geographic Concentration of Human Capital: Evidence from the cities’, Journal of Urban Economics 34(3), 380-400.

    Google Scholar 

  • Reynolds, P. D. and W. R. Maki, 1990, Business Volatility and Economic Growth, Project report submitted to the U.S. Small Business Administration.

  • Reynolds, P. D., D. J. Storey and P. Westhead, 1994, ‘Cross-national Comparisons of the Variation in New Firm Formation Rates’, Regional Studies 28(4), 443-456.

    Google Scholar 

  • Romer, P. M., 1986, ‘Increasing Returns and Long-run Growth’, Journal of Political Economy 94(5), 1002-1037.

    Google Scholar 

  • Romer, P. M., 1990, ‘Endogenous Technological Change’, Journal of Political Economy 98(5), 71-102.

    Google Scholar 

  • Schutjens, V. A. J. M and E. Wever, 2000, ‘Determinants of New Firm Success’, Papers in Regional Science 79(2), 135-153.

    Google Scholar 

  • Smith, D. M., 1966, ‘A Theoretical Framework for Geographical Studies of Industrial Location’, Economic Geography 42(2), 95-113.

    Google Scholar 

  • Storey, D.J., 1994, Understanding the Small Business Sector, London [etc.]: Routledge.

    Google Scholar 

  • Sutton, J., 1997, ‘Gibrat's Legacy’, Journal of Economic Literature 35(1), 40-59.

    Google Scholar 

  • Van Dijk, J. and P. H. Pellenbarg, 2000a, ‘Spatial Perspectives on Firm Demography’, Papers in Regional Science 79(2), 107-110.

    Google Scholar 

  • Van Dijk, J. and P. H. Pellenbarg, 2000b, ‘Firm Relocation Decisions in the Netherlands. An Ordered Logit Approach’, Papers in Regional Science 79(2), 191-219.

    Google Scholar 

  • Vaessen, P., 1993, Small Business Growth in Contrasting Environments, Amsterdam [i.e. Utrecht]: Royal Dutch Geographical Society.

    Google Scholar 

  • Wever, E. and W. van der Velden, 2000, ‘Het Regionaaleconomisch Landschap van Nederland’, in W. van der Velden and E. Wever (eds.), Regio's in Beweging, Utrecht: Rabobank Nederland, pp. 33-55.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Faculty of Spatial Sciences/Urban and Regional Studies Institute (URSI), University of Groningen, P.O. Box 800, 9700 AV, Groningen, The Netherlands

    Gerke J. Hoogstra & Jouke van Dijk

Authors
  1. Gerke J. Hoogstra
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jouke van Dijk
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Hoogstra, G.J., van Dijk, J. Explaining Firm Employment Growth: Does Location Matter?. Small Business Economics 22, 179–192 (2004). https://doi.org/10.1023/B:SBEJ.0000022218.66156.ac

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/B:SBEJ.0000022218.66156.ac

Keywords

Search

Navigation