Explaining the geographical variation in firm births across industries in New Zealand

Abstract

Previous studies have shown that firm births are linked to productivity growth and that birth rates are high in New Zealand compared to many other OECD countries, largely as a result of low barriers to entry and low costs of starting up a firm. Research on the variation in firm birth rates across regions is still a relatively new and growing field with little work being done with regards to New Zealand or in considering differences between industries. This paper identifies factors that influence firm birth rates across New Zealand territorial authorities, and investigates how the effects of these factors vary across industries. Studies have investigated a range of characteristics that may affect the firm birth rates across regions. This paper uses mainly demographic and industry information to study the effect of growth in demand, agglomeration (urbanisation and industry specialisation), barriers to entry, input costs, market access, labour force characteristics and general economic conditions on firm birth rates across single-digit industry classifications. It is found that in general, industry density (a measure of the number of firms) and growth in demand are the main influences on firm births but a number of the other factors show differing influences depending on which industry is considerd. Reasons for why certain variables may affect particular industries differently are discussed along with potential areas for further research.