Location Choice of New Business Establishments: Understanding the Local Context and Neighborhood Conditions in the United States

Abstract

With the continuing shift toward e-commerce, physical business locations with a brick-and-mortar presence become an endangered element of urban fabric, land use, and the local economy. City governments and local municipalities have created and implemented a variety of strategies and incentives to stimulate new business activity within their jurisdictions. A policy of enhancing the business climate is productive in some regions but not in others. To understand these variations in outcomes, this research focuses on examining the relationship between the uniqueness of certain regions, spatially bounded characteristics, and how both affect where new establishments locate. A two-level model is introduced to employ the census tract as a spatial unit of analysis and analyzes new establishments within 27 medium-sized metropolitan statistical areas in the United States. That quantitative model allows this study to determine key regional and neighborhood factors, as well as the existence of previously unmeasured factors, influencing location decisions of new establishments. The results of this study confirm the importance of economic, demographic, and geographic conditions at the neighborhood level, providing a better understanding of the vulnerability of the local economy.

Assessment of regions using an index for a location’s attractiveness for business development

“…The concept of attractiveness for business development is a research area that is among the most difficult to define, as it combines different interrelated aspects of favourable conditions for doing business, investment, living, working, learning and travelling. Therefore, we find overlapping concepts such as investment attractiveness (Godlewska-Majkowska, 2018;Strzelczyk, 2015), business environment (Kisel ' akov a et al, 2019), economic environment (Dub e et al, 2016), business climate (Conroy et al, 2017), economic performance (Chin, 2020), market environment (Budzy nska, 2016), country characteristics (Kotler et al, 2019) and geomarketing (Ramadani et al, 2018). Research that focuses on location-specific rather than country-specific factors and that addresses issues of business development rather than the attraction of investment, uses the concept of a location's attractiveness for business development (Dub e et al, 2016;Godlewska-Majkowska, 2018;Ramadani et al, 2018).…”

“…The factors analysis that is usually done is based on the one of three theoretical frameworks, namely, the neo-classical, behavioural, or institutional framework (Kotler et al, 2019). The institutional approach plays a crucial role in the analysis of location attractiveness in the context of the establishment of a new business (Chin, 2020), but all these approaches are widely used in international business decision and business reallocation research. The first decision a company faces is the selection and evaluation of a foreign market (Aliouche & Schlentrich, 2011).…”

“…Many studies have already highlighted the fact that countries that are attractive for business development (Godlewska-Majkowska & Komor, 2017;Strzelczyk, 2015) and for governance infrastructure (Younsi & Bechtini, 2019) are likely to attract more businesses and foreign direct investment. However, a policy of enhancing the business climate may be productive in some regions but not in others (Chin, 2020). Foreign investments have become increasingly vulnerable to the quality of institutions, as the motive for foreign investment has shifted from seeking markets and resources to seeking greater efficiency (Dunning, 2003).…”

“…This paper makes several important contributions. First, it contributes to the regional economic development literature (Chin, 2020;Capello & Lenzi, 2018;Gazzola et al, 2019;Machado Junior, Nassif, Ribeiro, & Bazanni, 2018;Martin et al, 2018;Godlewska-Majkowska, 2018;Dub e et al, 2016;Strzelczyk, 2015) by exploring the concept of the attractiveness of a location for business development using the smartness approach, and by discovering the time lag of the impact of this attractiveness on the establishment of a new business. Secondly, the focus is placed on NUTS level 3 regions because attractiveness has been explored more commonly at country level.…”

Exploring the Complexity of Location Choices of the Creative Class in Europe: Evidence from the EU Labor Force Survey 1995–2010

“…In the major regions in Europe, the quality of the business climate also plays a crucial role in determining the spatial distribution of creative workers, and this pattern may also vary across different sizes of regions. As people become increasingly aware of the emerging significance of the complex interconnections between various socio-economic aspects, these concepts, which are different from the people climate that Florida defined, are categorized as elements that signal the business climate [45]. During measurement, the well-known variables such as the level of social provision or the service quality of local government and university location were included.…”