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Small Firms, Business Dynamics and Differential Development of Economic Well-Being.

  • Economics


In recent years a growing stream of research has examined the relationships between structural characteristics of regions and their levels of new firm formation. This empirical study aims at supplementing such findings with analyses that include other forms of business dynamics. From a unique and comprehensive data set that tracks all births, deaths, expansions, and contractions of commercial business establishments in Sweden 1985-89, six groups of regions with different patterns of dynamics are extracted by means of cluster analysis. The clusters' structural characteristics and their development of economic well-being are also compared. The results suggest (1) that the patterns of business dynamics are contingent on the structural characteristics of regions, (2) that high formation and turnover of establishments are associated with a relative increase in economic well-being, and (3) that small, autonomous firms have a vital role in this process. Copyright 1995 by Kluwer Academic Publishers

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