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Why Location Matters With Entrepreneurial Projects

05/11/2010
Entrepreneurial activity in one U.S. county or state often reflects similar activity in neighboring jurisdictions, according to an analysis of geographic and other patterns in new business formation across the United States.

The study, New Business Clustering in U.S. Counties, 1990-2006, by Larry A. Plummer, sheds light on business activity related to levels of education, industry, economic growth patterns, and geography. The report uses 1990-2006 business startup and closure data from the Census Bureau's Statistics of U.S. Businesses.

"State and local policymakers are continually looking for ways to generate new businesses, industries, jobs, and economic activity," said Acting Chief Counsel for Advocacy Susan M. Walthall. "The big question is always how and where new businesses are most likely to grow. This research provides some important clues to the relationships between business startups and various underlying factors in industries and across counties and states in the United States."

The study offers a number of insights about new business clusters, among them:

As expected, populous counties-Los Angeles, Cook (Chicago), and New York-have the highest levels of entrepreneurial activity.

The nation's interior and northwestern counties-especially in states like Colorado, Utah, and Washington-tend to have the highest firm birth rates and levels of entrepreneurial activity.

Retail trade has the highest rate of new firm births, followed by local market industries.

High technology is the only industry sector specifically favored in counties with access to an educated workforce and a local research and development structure.

New startup rates in high technology are tied to startup rates in business services, an indication that business service firms may form in response to high tech entrepreneurial activity.

Higher unemployment is correlated with higher firm birth rates except in the business services industries-an indication that business service firms depend on the success of other firms.

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