What determines entry? Evidence from Sweden

In this paper, I examined what conditions affected the entry of Swedish limited liability firms 2000–2008, while making a distinction between regular entrants and those that survive for at least 2 years. I used a dataset that makes it possible to trace entry geographically as well as in what industry it occurs down to the 5-digit NACE level. Results suggest that the conditions influencing regular entry were similar to those influencing surviving entry. Political variables, e.g., municipal tax rate and the ideology of local rule, were of limited importance. Meanwhile, municipalities with industries with high minimum efficient scale of production or high market concentration rates were considerably less likely to see new firm formation. Substantially, more entry occurred in municipalities with high-income and a well-educated population. The importance of the level of education appears stronger for surviving entrants than for regular entrants, pointing to the importance of human capital.