Abstract:
The formation of new firms is an important determinant of economic
and regional development. The literature on industrial organization
highlights agglomeration as one of the main factors enhancing the
formation and scale of operation of new firms. Using data from the
Directory of Industries, this study estimates a model that determines the effect of local conditions on new firms’ formation and scale of operation in the manufacturing sector in Punjab, Pakistan. Our findings reveal that agglomeration through localization and urbanization has a strong impact on the formation of new firms and their scale of operation.
