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Spatial and Sectoral Patterns of Firm Entry in China

This article provides new empirical evidence on the patterns of firm entry across sectors and space. Based on Pavitt’s four manufacturing industry categories—supplier-dominated, scale-intensive, specialized suppliers, and knowledge-based—we use China’s firm-level database, covering all manufacturing firms with sales above 5 million RMB from 1998 to 2008, to investigate the relation between spatial patterns of new entry firms and industrial structure change and firm heterogeneity. Based on our analysis, there are three key findings. First, industrial structure change plays an important role in influencing the sectoral pattern of new firm entry. Second, the transformation from a supplier-dominated industry to a scale-intensive industry from 1998 to 2008 in China has largely influenced spatial patterns of new entry firms (mainly spatial agglomeration and entry similarity between regions). Third, the heterogeneity of firms (mainly firm ownership, firm size, and technological relatedness) affected the location choice of new entry firms. Based on our findings, we conclude that the importance of industrial structure change and the heterogeneity of firms in revealing the spatial pattern of new entry firms should receive more attention. Key Words: China, firm entry, firm heterogeneity, industrial structure change, sectoral and spatial pattern.