REGIONAL DETERMINANTS OF THE SMALL AND MEDIUM SIZE MANUFACTURING FIRM ENTRY IN A DEVELOPING COUNTRY: EVIDENCE FROM TURKEY

Abstract

Purpose- This study investigates regional determinants of the small and medium size firm entry in the manufacturing sector for a developing country, Turkey, in which regional economic development disparities are common.

Methodology- Panel data was collected for the period between 2004 and 2009 and analysed by using Feasible GLS estimation technique.

Findings- The results show that entrepreneurship culture, the structure of the industry, industry agglomeration overall are the most important factors stimulating the entry rates. However, the number of patent application as a supply-side variable seems to be the main deterrent of new firm entry by working as a fence in front of new firms. The average wage and low skill labor in labor force are the other factors that negatively influence new firm formation in demand and supply side of the economy.

Conclusion- Some of these regional variables affecting business formation in developed countries have no influence on the small and medium size firm formation in developing countries. This suggests that the determinants could be country specific. Therefore, policy makers should be careful while using evidence from developed countries to stimulate firm start-ups in developing countries.

Keywords

• New firms; start-ups,regional determinants,regional development,Turkey

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