High-growth firms and their habitats

Abstract

Abstract We examine how the geography of entrepreneurial quality differs from the geography of entrepreneurial quantity by analyzing spatial variation in high-growth firms (HGFs) across Swedish municipalities during 2002–2022. Using longitudinal firm-level data matched to survey measures of local business climate, we compare the determinants of start-up rates and firm scaling. Standard supply- and demand-side factors — population size, human capital and economic structure — are associated with both outcomes, though not uniformly. In contrast, local business climate, capturing entrepreneurs’ assessments of how local authorities function in practice, is a substantially stronger predictor of HGFs than of start-ups. The association is economically meaningful and varies with local economic structure. The findings point to a micro-level mechanism that may link local framework conditions to aggregate outcomes: interactions between growth-oriented firms and local institutions during scaling. These patterns suggest that local institutional conditions are related not only to how many firms are created, but to which firms are able to grow.