Crowdsourced data indicates broadband has a positive impact on local business creation

Abstract

Broadband connectivity is regarded as generally having a positive macroeconomic effect, but we lack evidence as to how it affects key economic activity metrics, such as firm creation, at a very local level. This analysis models the impact of broadband Next Generation Access (NGA) on new business creation at the local level over the 2011-2015 period in England, United Kingdom, using high-resolution panel data. After controlling for a range of factors, we find that faster broadband speeds brought by NGA technologies have a positive effect on the rate of business growth. We find that in England between 2011-2015, on average a one percentage increase in download speeds is associated with a 0.0574 percentage point increase in the annual growth rate of business establishments. The primary hypothesised mechanism behind the estimated relationship is the enabling effect that faster broadband speeds have on innovative business models based on new digital technologies and services. Entrepreneurs either sought appropriate locations that offer high quality broadband infrastructure (contributing to new business establishment growth), or potentially enjoyed a competitive advantage (resulting in a higher survival rate). The findings of this study suggest that aspiring to reach universal high capacity broadband connectivity is economically desirable, especially as the costs of delivering such service decline.