New Business Survival in Georgia: Exploring the Determinants of Survival Using Regional Level Data

New business formation is an important stimulant to economic activity. However, some 20 percent of new firms die within their first year of operation. Policy makers designing programs to engineer regional economic development need to know what specific factors affect new firm survival. This paper conducts an analysis of the determinants of survival for new enterprises in the state of Georgia. Special emphasis is placed on the importance of local factors. Duration analysis is applied to four cohorts of new enterprises starting during the period 2001 to 2004. The results show that firms located in urban areas are at a higher risk of failure. However, firms situated in counties that have achieved a high level of economic development stand a better chance of surviving. Other factors such as firm size, ownership structure, industry entry rates, and business cycle fluctuations are also influential.