Firm Entry and Exit in Iowa, 1992 - 2004

This paper uses the pattern of firm entry and exit to develop a classification system forindustries. The classifications include urbanruralbias; longtermgrowth; and firm survivalpatterns. The first captures the fact that sectorspecificeconomic growth may be favored inurban areas for some industries and may benefit from low population density for others. Someindustries have experienced longtermexpansion in firm numbers while others have experienceda decline. Finally, some industries are characterized by high rates of both entry and exit whileothers have low rates of both. A taxonomy classifying industries according to those three criteriais developed in this paper. The taxonomy is applied to the Iowa subset of the NationalEstablishment TimeSeries(NETS) database over the period from 1992 to 2004. County levelentry and exit rates are shown to be positively correlated across nearly all 2 digit NAICS codeindustries. Industry growth is found to be biased against rural areas. Not all of the industriesexperienced expansion or have a positive net entry rate. Entry of new firms replaces oldincumbent firms in each industry but to different degrees. Understanding firm entry exitpatterncan help design customized policies of fostering expansion of specific industries in Iowaaccording to their location bias, industry growth patterns and development dynamics.[...]