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NEW VENTURE GROWTH IN FRANCE: DO LOCAL GOVERNMENT POLICIES MAKE A DIFFERENCE?
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This research examines the effect of different types of regional and local government nurturing policies on rates of new firm formation and on early corporate growth (i.e. the emergence of young growing firms from the new small firm pool). Three distinct types of nurturing policy are identified: physical asset subsidies, skills enhancement, and information provision. The research site is France. The paper reports initial findings from a 50% sample of the 83 rural departments (counties) located outside the central Ile-de France region.
A new database on young growing firms (defined as new manufacturing firms started between 1973 and 1992 which were still independent and employed 50 or more by 1992) was created. This, and national statistics on total annual new firm creation, formed the dependent variables. Independent variables included standard regional factors, and, in addition, measures of local and regional skills enhancement, information provision, and physical assets subsidies. Correlation and multiple regression analysis was conducted. Non-parametric tests were also conducted.
New firm formation rates and early corporate growth rates were not highly correlated at the departmental level. Contrary to expectations, early corporate growth rates in the southern "Sunbelt" (recognized as a growth area) were not particularly high, although some sunbelt firms underwent spectacular growth. Departments in the Rhone-Alpes region had higher levels of early corporate growth than expected. The difference appears to be due to Rhone-Alpes92 stronger and more mature industrial base.
These initial results suggest that, for manufacturing, early corporate growth rates may lag new firm formation rates. For regions such as those in the sunbelt which have invested heavily in skills enhancement and subsidizing new startups, their reward in high levels of new firm starts has yet to translate into high levels of new firm growth.