Spatial Varying Relationship between Financial Development and New Firm Formation: Evidence from a Developing Country

Abstract

This study investigates the spatial varying relationship between financial development and new firm formation in Turkey. Even preliminary findings show that regional financial development spurs new firm formation; evidence from Geographically Weighted Regression stresses the heterogeneous impact of finance, which mostly favours the developed regions. Results for the 2002 to 2009 epoch show impact of finance fluctuates within a range of 0.189 for deposits and 0.082 for credits with the lowest impact observed in Eastern Turkey. This points to the necessity of considering the spatial heterogeneity of regional policies, which underlines that one size does not fit all regions.