Globalization, International Spillovers and Sectoral Changes
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Globalization, International Spillovers and Sectoral Changes

Implications for Regions and Industries

Edited by Charlie Karlsson, Andreas P. Cornett and Tina Wallin

As a consequence of globalization, news, ideas and knowledge are moving quickly across national borders and generating international spillovers. So too, however, are economic and financial crises. Combining a variety of methods, concepts and interdisciplinary approaches, this book provides an in-depth examination of these structural changes and their impact. Assessing the implications of globalization for businesses and sectors, chapters focus on the interdependencies between different economic and political layers, and explore topics such as human capital, creativity, innovation, networks and collaboration.
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Chapter 8: Location, location, location: place-specific human capital, rural firm entry and firm survival

Georgeanne M. Artz, Zizhen Guo and Peter F. Orazem

Abstract

We review the literature on rural firm entry and survival, and summarize key findings from our own recent work on this topic. Our research suggests the location choices of entrepreneurs are tied to an unobservable match between the entrepreneur and the location of the venture that enhances firm productivity and increases survival in both rural and urban places. We conjecture that entrepreneurs have place-specific human capital that affects firm entry and plays a role in firm exit and succession. In thin, rural markets, the probability of finding another entrepreneur with the same location-specific skillset to purchase the firm is low, and there are fewer alternative uses for the assets in the market. As a result, rural firms face a type of asset fixity problem which reduces exit, even as market condition lower profitability. This implies a role for place-based economic development and for rural businesses transition policies.

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