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REGIONAL CHARACTERISTICS AFFECTING ENTREPRENEURSHIP:
A CROSS NATIONAL COMPARISON

Paul A Reynolds
David Storey

Center for the Study of Entrepreneurship
School of Business Administration
Marquette University
Milwaukee, WI 53233

Telephone
414-288-5578

Fax
414-288-1660

Paul Westhead

SME Center
U. Warwick
Coventry CV4 7AL
UNITED KINGDOM

Telephone
44-0203-523-692

FAX
44-0203-523-747

Principal Topics
The effect of regional characteristics on new firm births is of considerable interest for both those establishing new firms and government policies to affect new firms. There is no question that a number of factors or processes are of importance; the major issues is the relative importance of different processes. For example, the relative impact of overall economic growth, the relative prices of input factors, and the availability of resources, the nature of the indigenous business population, as well as the impact of government programs has not yet been established. This presentation will report the results of comparisons across 8 countries (France, Germany, Japan, Italy, Ireland, Sweden, United Kingdom, and the United States) to determine the relative significance of different processes in market economies. Some of the results have important implications for public policies designed to promote entrepreneurship and new firm foundings.

Method and Data Base
Sponsored by a variety of sources, with major partial support of European countries and their coordination provided by the European Commission, research teams in each country used the same strategy. The country was divided into sub-national geographic regions and measures of firm births were developed for the late 1980's, standardized as annual births per 100 firms and annual births per 10,000 human population. Measures of major regional characteristics, designed to reflect regional variations in demand, urbanization, unemployment, personal/household wealth, presence of small firms and economic specialization, local business ethos, and government spending/policies were developed for the early 1980's. All research teams used simple ordinary least squares regression analysis to develop linear models using the two measures of firms births as the dependent variables. It was possible to develop two sets of models, one that focused on new firm births in all industry sectors and the second that focused on manufacturing new firms.

Despite the fact that no two countries used the same measures of firm births, basis for defining geographic regions, or indicators of the independent variables, substantial comparability was found across the eight countries. Models were different for new firms in all industries when compared to new firms in manufacturing.

Implications
The high level of variation in firms births accounted for by the linear models reflecting basic regional characteristics suggested it would be very difficult for small scale or piecemeal government programs to have a significant impact.

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