Principal Topic

New firm gestation rates in Argentina are not only lower than those estimated in developed countries but also important spatial differences have been found among the five Argentinean cities where this study is been conducted.

These results raise important questions about the reasons related to the process of new firm gestation. But in boarding this topic a new question has arisen. It’s related to the convenience of analyzing differences among countries on the basis of average gestation rates, when there are important disparities among cities within each country. In consequence, this paper analyzes the reasons why five Argentinean cities generate different number of entrepreneurial ideas. It also explores the specific characteristics of each local environment that affect in a different way, the patterns of new firm gestation.

For that purpose, various theoretical frameworks are reviewed in order to identify the main factors that could be related to demand and supply of entrepreneurial ideas. Subsequently, spatial factor differences are analyzed in relation to new firm gestation rates in the Argentinean cities researched.

Method

As a first step, new firm gestation rates are estimated from a population sample of about 2000 households in each city, screened during the months of August to November 1998. Second, different measures are developed for the variables representing the factors defined in theory and estimation for each city is done using secondary source data. Third, significant differences among cities in the value of each variable,  tested with chi-square and Marascuilo procedure, allow the selection of variables to be used in the correlation analysis. This is conducted to examine linear relationships between new firm gestation rates in each city and each variable selected.

Implications

The main preliminary results link different new business start up rates to the patterns of specialization of the economic activities, actual levels of concentration, technological and scale barriers to entry and the occupational experience and education acquired by each city population. No significant correlation has been found in the study, between each city gestation rate and demographic traits of nascent entrepreneurs, macroeconomic performance of the economy, institutional dynamism or entrepreneurial local culture.

The results of this research are crucial for the design of policies aimed to increase the level of new ventures. It also set grounds for extending future research at national and sub-regional level in Latin-America, but always designed to capture local differences in business start-ups.