Work

Agglomeration, (un)‐related variety and new firm survival in China: Do local subsidies matter?

Year: 2016

Type: article

Abstract: We study empirically the effects of five different dimensions of agglomeration – specialization, diversity, related variety, unrelated variety, and city size – on the survival chances of new entrepreneurial firms in China. Consideration is further given to studying the mediating effects of local subsidies on new firm survival given different existing local industrial structures in those regions. In support of the ‘regional branching’ hypothesis, we find that increasing local related variety has a stronger positive effect on new firm survival than other types of agglomeration. We also find that receiving comparatively fewer subsidies motivates firms to seek out and benefit from local existing economies, which in turn, positively influence their chances of survival. By contrast, agglomerated firms that receive relatively more subsidies tend to be more likely to face financial distress leading to eventual market exit. The findings thus reveal that both the intensity and the location of state support matters in terms of optimizing positive agglomeration effects on firms' post-entry performance and survival.

Source: Papers of the Regional Science Association

DOI: 10.1111/pirs.12269

Authors: Anthony Howell, Canfei He, Rudai Yang, C. Cindy Fan

Institutions: Peking University, University of California, Los Angeles

Language: English

Topic: Regional Economics and Spatial Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $2,740