PAUL WESTHEAD is a research assistant at the Cranfield School of Management, England. New manufacturing firms have in the last few years become an increasingly important focus of academic debate and government policy in many advanced capitalist industrial countries. In terms of job generation and their postulated role in fostering healthy and diverse local economies they have been viewed by some commentators as a key to national economic recovery in the long run and a panacea for all economic problems. This has served to increase both policy interest and research in the economic role of new firms and differences in rates of formation from place to place and from sector to sector in the economy. There is a need for more detailed research into the nature and extent of spatial variations in new manufacturing firm formation rates, not least because such information is an essential prerequisite in justifying the case for a spatially selective small firms policy. In this paper the spatial pattern of new manufacturing firms formation in Wales in 1979-88 period is detailed. In order to understand spatial differences in formation rates, new firm formation theory was referee to and a range of hypotheses presumed to be associated with the firm formation process were explored using correlation and regression analysis. High rates of new firm formation were found to be closely associated with aspects of rurality, high levels of self-employment and a tradition of employment in small plants.
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