The role of regions for different forms of business organizations

The evidence for associations between area characteristics and entrepreneurship is fairly consistent in most studies. These studies, however, have disregarded the fact that the areas might be constructs that have no effect on the individual differences in entrepreneurship and, furthermore, have conflated entrepreneurship and sole proprietorship, disregarding the impact of area constructs on different forms of business organizations. Therefore, we investigate and quantify, within a multi-level framework, the importance of municipalities and regions for understanding individual differences in entrepreneurship and self employment (defined as sole proprietorship). By using register data comprising the entire Swedish population for 2000–2010, we decompose the variation for the respective form of business organization into three levels: the individual, the municipality and the region. Our results show that about 10% of the total variation in entrepreneurship can be attributed to the municipality and region level. The corresponding numbers for self employment are 3–4%. Our results indicate that regions and municipalities differ markedly in area impact for entrepreneurs compared to self employed. The results from the present study show the importance of taking into account the form of business organization in economic analysis, and they can be used when considering whether it is appropriate to focus on specific municipalities and regions for policy interventions on self-employment.