3.1.2. Regional Control Variables

The location of the establishment is likely to have an impact on its survival rate. To capture the impact of the local economic environment, commonly used measures of regional characteristics from the literature are used. Besides regional controls, financial capital and human capital controls are also used to evaluate their impact on establishment survival rate.

To partially address the issue of the potential endogeneity of some of these measures with the dependent variable, in the spirit of the econometric technique commonly followed in similar studies, lagged values of some of these variables are used in the econometric analysis. The key regional control variables used in the model and their respective data sources are provided in Appendix A.

No multicollinearity is found in the model. The variance inflation factor (VIF) for each regional control variable is less than 5.
