The contingent nature of broadband as an engine for business startups in rural areas

Abstract

The introduction of the Internet in the 2000s was believed to be an effective solution for helping rural economies but previous studies found mixed results. Following the prevailing COVID‐19 pandemic, the idea has surfaced that broadband accessibility would result in an increasing number of people and firms relocating to smaller towns and rural areas. In this study, we provide new evidence on the impact of ultrafast broadband on rural economies by considering industrial and spatial heterogeneity. To achieve this, we evaluated the impact of the French Very High‐Speed Broadband Plan on business startups in rural municipalities between 2013 and 2018 using difference‐in‐differences with prematching. The evidence reveals that positive broadband effects are limited to municipalities with good initial conditions in terms of local economic climate, natural amenities, and demographics. From a policy perspective, our results suggest that broadband is not a panacea, and focusing on broadband access only is likely to have little impact in structurally weak rural areas.

Accès au très haut débit et développement territorial en période d’incertitude : note éditoriale

“…Cependant, la relation est parfois plus complexe, notamment pour les services intensifs en savoir. Ainsi, si la chute des coûts de communication conduit à une centralisation des activités financières, d'assurance et immobilières, elle favorise au contraire la déconcentration des activités créatives vers les espaces ruraux bien dotés en aménités (Duvivier et Bussière, 2022). L'effet varie aussi selon le type d'espace considéré et, en particulier, selon le degré d'urbanité.…”

“…However, the relationship is sometimes more complex, especially for knowledge-intensive services. For example, while falling communication costs lead to the centralization of financial, insurance, and real estate activities, they instead promote the deconcentration of creative activities to amenity-rich rural spaces (Duvivier and Bussière, 2022).…”

“…This is not to say that rural areas do not benefit from the Internet as the gains are, in some sectors and spatial contexts, non-negligible (Kandilov and Renkow, 2010;Kim and Orazem, 2017;Townsend et al, 2017). However, spillovers are relatively weaker than in urbanized territories, confined to the most favourable spatial contexts, and more often negative (Duvivier and Bussière, 2022). There are many reasons for this.…”

“…Among them, the more limited use of the Internet in rural CJRS/RCSR | Volume 45, Numéro 2 2010 ; Kim et Orazem, 2017 ;Townsend et al, 2017). Toutefois, les retombées sont relativement plus faibles que dans l'urbain, confinées aux contextes spatiaux les plus favorables, et plus souvent négatives (Duvivier et Bussière, 2022). Les raisons sont multiples.…”

Digital highways and firm turnover

“…We also add to the long‐standing literature on the determinants of firm entry and exit (Bain, 2013; Bruno et al, 2013; Caves, 1998; Dunne et al, 2013; Geroski, 1995, among others). In particular, we speak to the recent literature that emphasizes the role of broadband internet in fostering firm entry (Duvivier & Bussière, 2022; Hasbi, 2020; McCoy et al, 2018, among others), especially in ICT‐intensive sectors (Hjort & Poulsen, 2019). However, those studies neglect the potential effect of broadband on firm exit.…”