Working Paper: NBER ID: w28606
Authors: John M. Barrios; Yael Hochberg; Daniele Macciocchi
Abstract: How do geographic and historical-cultural factors shape new business formation? Using novel data on new business registrations, we document that 75% of the variation in new business formation is explained by time-invariant county-level factors and examine the extent to which such variation is driven by historical, cultural, and geographic factors. Current-day new business formation is positively related to historical attributes that presage individualist culture: frontier experience and historical birthplace diversity, as well as the county’s topographical features. The relation holds when we exploit plausibly exogenous variation in frontier experience driven by shocks to the settlement process that arise from historical immigration flows. Our study points to the fundamental role of geographic and historical-cultural features, especially rugged individualism, in explaining contemporary new business formation in the U.S.
Keywords: Entrepreneurship; Business Formation; Geographic Factors; Cultural Factors
JEL Codes: L26; N3; N9; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Greater total frontier experience (TFE) (F12) | Historical diversity in immigrant backgrounds (J69) |
| Greater total frontier experience (TFE) (F12) | Terrain ruggedness (R14) |
| Greater total frontier experience (TFE) (F12) | New business formation per capita (L26) |
| Greater total frontier experience (TFE) (F12) | Entrepreneurial quality index (L26) |
| Greater total frontier experience (TFE) (F12) | New business registrations (M13) |
| Historical diversity in immigrant backgrounds (J69) | New business starts (M13) |
| Terrain ruggedness (R14) | New business registrations (M13) |