Entrepreneurship and Employment: The Simultaneous Impacts of Establishment Births versus Deaths on Regional Employment across the United States

This study investigates the non-linear effects of establishment births versus deaths on regional employment, which show asymmetric pathways between intra-regional versus inter-regional spillovers. Using state-year data on establishment births, deaths, and employment for service sectors in the 48 contiguous U.S. states from 1980 to 2014, the study implements three-stage least squares (3SLS) regressions to test competing forces of multiplier versus competition effects, with endogeneity and spatial and temporal dependencies addressed. Empirical results support the following ‘four’ non-linear, asymmetric relationships as hypothesized: (i) establishment births initially increase total employment within a focal U.S. state, but decrease it with excessive establishment births within the state (i.e., inverted U-shaped); (ii) establishment births in the neighboring states of a focal U.S. state initially decrease total employment in the focal state, but increase it with excessive establishment births in the neighboring states (i.e., U-shaped); (iii) establishment deaths initially decrease total employment within a focal U.S. state, but increase it with excessive establishment deaths within the state (i.e., U-shaped); and (iv) establishment deaths in the neighboring states of a focal U.S. state initially increase total employment in the focal state, but decrease it with excessive establishment deaths in the neighboring states (i.e., inverted U-shaped). These findings also hold at the fine-grained geographic level of metropolitan statistical areas (MSAs) and under diverse contextual conditions. The study contributes to the literature by testing the theoretical thresholds at which the dominance between multiplier and competition effects can be reversed in non-linear pathways, and by empirically estimating the asymmetric interdependences of regional employment between intra-regional versus inter-regional spillovers of establishment births and deaths.