Staying Power : What Influences Micro-firm Survival in Tourism?

The purpose of this paper is to investigate how previous experience and location of entrepreneurs influence the survival of new tourism firms. The paper departs from recent evolutionary economic geography advancements, highlighting the importance of routines and skills as well as location-specific knowledge for firm success. While having been well-researched for manufacturing industries characterized by high entry barriers, little knowledge is currently available on the factors influencing survival rates in service sectors with low entry barriers. A quantitative approach applies hazard models to investigate the survival rates over a seven-year period of a total of 133 new micro-tourism firms started between 1999 and 2001 in the four northernmost counties of Sweden. The geo-referenced micro-database ASTRID links information on firm features (e.g. firm births and deaths, spatial coordinates and industry codes) to characteristics of entrepreneurs (e.g. age, education, previous experience). The main finding is that entrepreneurs with previous work experience in related sectors are more likely to survive and, in this case, entrepreneurs without local experience tend to be less successful. We find no evidence that new firms operating in regions specialized in tourism have a survival advantage. Our analysis also indicates that surviving firms improve performance over time. The paper thus contributes new knowledge on the determinants of micro-firm survival in tourism.