Business cycle, industrial composition, or regional advantage? A decomposition analysis of new firm formation in the United States

Abstract

M13, R11,

Decomposing regional business change at plant level in Italy: A novel spatial shift‐share approach

“…According to Cheng (), most of the previous literature overlooks the fact that business change may depend on three distinctive sources, that is, the macroeconomic fluctuations or national effect, industrial composition and regional characteristics. Decomposition analysis thus seems to be a necessary condition, to isolate the effect of each component, before the spatial aspects of business change can be examined.…”

“…Delgado et al () provide evidence that the presence of complementary economic activity in a region creates externalities which enhance incentives and reduce barriers for new business creation. Finally, Cheng () argues that most previous literature overlooks the fact that business change may depend on three distinctive sources (macroeconomic fluctuations, industrial composition and regional characteristics) and suggests identifying the specific influence of each source before investigating the regional dimension of business change. To this end, he proposes adopting a shift‐share decomposition approach in order to look at the business creation in one specific region, which is conceptually different from looking at regional business creation.…”

“…To the best of our knowledge, the literature does not include other studies of the application of spatial shift‐share analysis to business change. Only Cheng () uses the same approach to investigate the new business creation in the United States but he does not take into account the spatial structure of data.…”

Firm Demography and Regional Development: Evidence from Italy

“…In this way, the influence of specific components of firm demography on regional development may be investigated. This decomposition is very important because, as argued by Cheng (), one could reach misleading results if single dimensions of firm demography are investigated without preliminarily applying some sort of filtering (see also Renski ). The possibility to distinguish between spatial and sectoral dimensions of firm demography may also contribute to help policy‐makers.…”

“… We use the terms “advantage” and “disadvantage” in relation to the specific contribution of each component to the change of firm demography (see also Cheng ). For example, a sectoral advantage means that we have a large number of firms in highly growing sectors, so that the industrial composition positively contributes to the change of firm demography.…”