Abstract:

I study local small business dynamics following entries of large firms, using the winner and close runner-up counties for “million-dollar plants.” Large firms may increase local demand for goods and services by positively impacting total income. Analysis with county-level business data shows that the number of small business establishments grew more following the entry of million-dollar plants, both immediately after the entry and in the three to five years after the entry. The evidence suggests that large firms’ presence may lead to indirect job creation and business growth, and that policy makers should take these effects into account when providing subsidies to attract large business establishment.