The changing determinants of new business formation in the Czech Republic

Abstract

This paper is concerned with the connection between new business formation rates and their theoretically substantiated regional determinants, using regression modelling. The dynamics of new business formation is evaluated comparing the influence of regional determinants in two time periods - 2001-2002 and 2011-2012. The Czech Republic is the area of interest. Empirical results indicate the coexistence of persistent and changing influences of regional determinants on new business formation. The quality of the entrepreneurial environment, industrial diversity and population change have a persistent and positive impact on new business formation. There is also a positive connection between agglomeration economies and new business formation. The increasing influence of agglomeration economies is indicated. The presence of foreigners is not a statistically significant determinant of new business formation in the 2001-2002 models. Nevertheless, the importance of this determinant is increasing. It is suggested that unemployment vulnerability has a negative impact on new business formation but has increasing importance on entrepreneurship in disadvantaged regions. Finally, spatial interactions are an inevitable part when considering the determinants of new business formation.