| New firm formation is not uniform across all localities, yet there has been relatively little research concerning regional variation in new firm formation. What research exists focuses on economic factors and fails to recognize that entrepreneurs operate in a social environment as well. This dissertation incorporates the concept of social capital, which is essentially the benefits of networking that lead to access to information and resources, as well as economic factors and analyzes new firm formation in Kentucky's 120 counties over a thirteen-year period using pooled cross-sectional time-series analysis. This quantitative analysis is supplemented with previous qualitative research including interviews with entrepreneurs and case studies of six counties in Kentucky and the neighboring states of Ohio, Tennessee, and West Virginia.; The results of the quantitative analysis demonstrate that economic conditions are important elements in regional variation in new firm formation. More specifically, urban counties with specialized economies and access to financial capital have more new firm formation than rural counties with diverse economies and less access to financial capital. In addition, there is a nonlinear relationship between unemployment and new firm formation in that new firm formation is greatest at very low and very high unemployment rates. Social capital, measured in terms of formal membership organizations and churches, has an unexpected negative effect, but the qualitative research clarifies the role of social capital in the new firm formation process. Social capital is important, but entrepreneurs utilize informal networks of family, friends, and colleagues rather than join formal organizations. The qualitative research corroborates some of the findings from the quantitative analysis and also highlights factors that are not analyzed in regional economic studies of new firm formation, factors such as workforce quality and the concept of an entrepreneurial culture. |
