Why Do Rural Firms Live Longer?

For the first thirteen years after entry, the hazard rate for firm exits is persistently higher for urban than for rural firms. While differences in observed industry market, local market, and firm attributes explain some of the rural/urban gap in firm survival, rural firms retain a survival advantage 18% greater in Iowa and 58% greater in Kansas than observationally equivalent urban firms. Evidence is consistent with a lower salvage price for the capital assets of failed rural firms. Entrepreneurs will require a higher success probability to enter a rural market rather than an urban market to leave their expected profits equal.