The impact of broadband and other infrastructure on the location of new business establishments
Using a unique dataset of broadband roll-out over time in different locations in Ireland, McCoy et al. examine how broadband networks and other local factors (such as motorways, other infrastructure, availability of human capital, and access to higher education facilities) affect the location decisions of new firms.
The data enables the authors to examine this question for foreign- and domestic-owned firms and to split firms according to the skill levels of their workers.
They find that the availability of basic digital subscriber line (DSL) broadband resulted in increased numbers of both low and high-tech firms, while the benefits of middle mile fibre in drawing firms to regional towns and cities appear to be concentrated in the high-tech sector.
The research reveals that the benefits of broadband, in terms of increased new businesses, appear to be greater in areas with higher educational attainment. The authors conclude that broadband availability may not be effective at encouraging new business at all in areas with low levels of educational attainment, measured as the proportion of the population with a higher education degree.
Broadband is a key factor in dispersing knowledge-intensive firms, but not the only factor. To maximise the benefit of broadband roll-out for all regions, policymakers should also consider the other factors that are important for regional development.
Key points for decision-makers
- The rate of new enterprise formation is a key determinant of the economic performance of regions.
- The roll-out of broadband has increased the formation of new enterprises in towns and cities across Ireland.
- This research shows that the benefits have been greater in areas with higher educational attainment.
- The researchers suggest that to maximise the benefit of broadband roll-out for all regions, policymakers should also consider the other factors that are important for regional development.