Is Degree of Rurality More Crucial to Small Firm Births than Access to Incubators? An Analysis of States' Relative Efficiencies in Promoting the Birth of Small Firms

Economic development via firm birth has recently been an important topic for many state governments. However, ways in which state governments can influence firm births are not obvious, and their efficiency in fostering firm births in comparison to their peers is even less so. Focusing on the birth of small firms in the contiguous US, regression analysis and non-parametric efficiency testing are employed to determine both the expenditures state governments can target to indirectly promote small firm birth and their relative efficiency in utilizing these expenditures. The regression results reveal three significant expenditure inputs and one significant controlling factor in determining firm birth, while the efficiency tests regarding states' use of these expenditure inputs give insight as to how they compare to their peers in terms of efficient target expenditure use.