Rural Entrepreneurship in the Face of Geodemographic Challenges

Rural entrepreneurs face significant obstacles due to factors such as sparse population, low density, aging population, remoteness from markets and financial providers, inadequate infrastructure, and challenging geographic conditions. These factors contribute to rural disadvantage, fueling rural depopulation. Governments often attempt to address rural depopulation by supporting entrepreneurship, but eligibility criteria vary widely. This paper develops a model of rural entrepreneurship liability explained by municipal demographic and geographic factors. We analyzed the geographical distribution of all companies established in Spain since 2012, along with the attributes of the municipalities where they are headquartered. While working-age municipal population is the primary factor in determining rural entrepreneurship liability, network coverage, altitude, and population variation also play noteworthy roles. Geographic constraints have a significant negative impact on entrepreneurship, but their influence is mitigated by the working-age municipal population, highlighting the unique challenges faced by rural entrepreneurs. One policy implication of our findings is that governments could consider using this model to allocate grants based on the actual difficulty of undertaking entrepreneurship in each municipality.