followed by the interpretation of the influential factors in correlation and regression
analyses.
4. Spatial Variations in Change of Firm Population in Turkey
To define the factors resulting in different firm growth structures, the social, economic and
industrial production characteristics of the provinces are taken into account. Although this
study is inspired by new firm formation studies, aiming to determine how structural
characteristics of regions relate to new firm formation (for further information see the
German case by Fritsch (1992), and Audretsch and Fritsch (1994), the French case by
Guesnier (1994), the Irish case by Hart and Gudgin (1994), the Swedish case by Davidsson
et al (1994), the British case by Keeble and Walker (1994), and the US case by Reynolds
(1994)), a different set of variables that are relevant for the country’s economic and social
structure were emerged.
As Reynolds et. al (1994) points out, new firm formation is important in terms of i) the
provision of new jobs, ii) the involvement of new firms in product or process innovations,
iii) the understanding of starting a new business as an important career option for many
people, iv) the relationship between higher new firm formation rates and substantial regional
prosperity. Besides these gains that can be attributed to the growth in firm population also, as
UNECE (1996) points out an increase in number of firms would serve to the transformation
to a market economy and the democratisation of society.
In the explanation of change in firm population in Turkish manufacturing industry, three
dependent variables are used: change in total firms (CHANTOT), change in micro firms
employing less than 9 people (CHANMIC) and change in firms in which more than 9
persons engaged (CHANSM). The hypothesis and their related measures are set up in the
following way:
1- Demand. It is assumed that when demand increases, more new firms will be founded to
satisfy the diversified needs. The variables included are the rate of population growth
(POPGR) between 1980 and 1985, the rate of gross domestic product growth per capita
(GDPCAPGR) between 1980 and 1985, and the total demand from other cities for the
observed one (DEMAND). This is the difference between the total GDP in the country and
the observed city’s GDP. However, to measure the impact of market size, the logarithmic
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