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

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

Research output: Contribution to journalArticlepeer-review

22 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)485-500
Number of pages16
JournalPapers in Regional Science
Volume97
Issue number3
DOIs
StatePublished - Aug 2018
Externally publishedYes

Keywords

  • Agglomeration
  • China
  • new firm survival
  • public subsidies
  • related variety

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Environmental Science (miscellaneous)

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