Exploring the role of the neighbourhood in firm relocation: differences between stayers and movers

This paper looks at the factors that influence an entrepreneur's decision to stay or move out of a neighbourhood. In general, new and relatively small firms tend to have a strong connection to their local environment and hardly ever move across large distances. Aspects of the building (e.g. size) are the most likely reason to move, but does the neighbourhood itself matter as well?

We look to what extent neighbourhood aspects influence or have influenced the decision to stay or move, both on the push and the pull side. These aspects may be related to the local physical environment or the safety situation, but also to the local social community.

We conducted in-depth semi-structured interviews with 40 entrepreneurs from five urban neighbourhoods in the Netherlands. The sample is equally divided between firms that stayed and firms that recently moved out of the neighbourhood (20/20). The survey provides detailed information on the characteristics and the performance of firms, as well as network contacts, neighbourhood attachment, location choice, and the valuation of location aspects. We make use of qualitative methods in order to analyze our data.

Overall, we found that the reasons behind firm relocation propensity are explained by a combination of the factors put forth in the neoclassical, behavioural and, to a lesser extent, also the institutional strand of literature. Costs, space, market and accessibility aspects are indeed important reasons for both actual and planned relocation, but they cannot be seen apart from other reasons relating to the entrepreneur as an individual. What stands out is that in general, firms move because firm-internal developments (growth) or, in the case of home-based entrepreneurs, because changes in the household situation or housing preferences make relocation necessary. Aspects of the weak neighbourhood itself are only regarded as problematic, and consequently influence relocation propensity, when these aspects directly affect firm performance.

Keywords: urban residential neighbourhood, firm relocation, neighbourhood characteristics

JEL codes: R23, R21