New firm formation as alternative regional policy : the case of West Glamorgan

• Main Author: Ball, J. G.
• Published: Swansea University 1995
• Subjects: 330.941
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.636025

Traditional regional policy based on inward migrating employers has proven inadequate in resolving the regional problem. New firm formation is regarded as a more plausible policy alternative. Therefore, an understanding of the process of new firm formation is required, otherwise such a policy is inadequately founded. West Glamorgan county was chosen as an appropriate area to undertake research since it has long been a recipient of regional aid and economically dependent on externally owned industry and the public sector. A comprehensive dataset of all entirely new firms established within the county between 1980-1986 was assembled. Utilising original sources and adopting precise definitions and methodology, 2509 new firms were identified. The service sector predominated and manufacturing firms were in a minority. The recession push theory of new firm formation was supported. Firms with unemployed founders were in the majority and the Enterprise Allowance Scheme proved an important support mechanism. New firms made a substantial contribution to diversification and to the high technology and innovative product sectors. Comparison was made between the dataset of new firms and published VAT data and the differences noted. A sample of firms was examined using the Cooper (1973) model of new firm formation to examine the personal, social, economic and environmental forces at work on the new firm founder. Differences were detected between employed and unemployed founders and between founders of manufacturing and services sector firms. The incubator hypothesis was partially supported and unemployment proved to be an important trigger mechanism.