Does Local Firm Ownership Matter?

Abstract

A data set for U.S. counties that includes residence status of firm owners is used to assess whether per capita density of locally owned businesses affects local economic growth, compared with nonlocal ownership. The database also permits stratification of firms across different employment size categories. Economic growth models that control for other relevant factors reveal a positive relationship between density of locally owned firms and per capita income growth but only for small (10-99 employees) firms, whereas the density of large (more than 500 workers) firms not owned locally has a negative effect. These results provide strong evidence that local ownership matters for economic growth but only in the small size category. Results are robust across rural and urban counties.

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