Gazelles and Their Habitats - Business Climate and the Geography of High-Growth Firms

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 2010–2022. 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 agglomeration and demand-side factors — population size, income, market potential, and economic structure — relate to both outcomes. 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 effect is economically meaningful and varies with local economic structure. The findings identify a micro-level mechanism linking local framework conditions to aggregate outcomes: interactions between growth-oriented firms and local institutions during scaling. Local institutional conditions not only influence how many firms are created, but which firms are able to grow. JEL : R11, L26, M13, R30