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Start-Ups Domestic Location Decisions, and the Entrepreneur's Geographical Origin

According to neoclassical location theory, the decision to locate a firm depends on the characteristics of the regions that affect profits. These characteristics can affect profits from both the cost and revenue side. On the cost side of the profit function, one usually considers factors such as the cost of labor, capital and land. On the revenue side, accessibility to the market is the most relevant factor. Empirical work has established the relevance of some of these factors, as well as the importance of different types of agglomeration economies. These studies have largely ignored factors related to the characteristics of the entrepreneur. Among these, the entrepreneur’s geographical origin seems to be a determinant factor in the business location decision. Using a microeconometric approach, we investigate in this paper the contribution of this variable to explain the decision to locate a domestic firm. The authors would like to express their appreciation for a grant from the Fundacao para a Ciencia e a Tecnologia, Lisbon, Portugal (Praxis/P/Eco/13134/1998). Paper to be presented at the European Regional Science Association 39 European Congress, Dublin, Ireland. Preliminary version. Please do not quote.