Agglomeration, (un)‐related variety and new firm survival in China: Do local subsidies matter?. (14th November 2016)

• Record Type: Journal Article
• Authors: Howell, Anthony; He, Canfei; Yang, Rudai; Fan, C. Cindy
• Is Part Of: Papers in regional science. Volume 97:Number 3(2018)
• Page Start: 485
• Page End: 500
• Publication Date: 2016-11-14
• Subjects: Agglomeration -- related variety -- new firm survival -- public subsidies -- China; Regional planning -- Periodicals; City planning -- Periodicals; Urbanization -- Periodicals; Economic geography -- Periodicals; 307.12
• DOI: 10.1111/pirs.12269
• Languages: English
• ISSNs: 1056-8190

Abstract

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.