Environmental Factors and Their Impact on the Exit of Manufacturing Firms: A Spatial Econometrics Approach

Many factors affect the exit of firms from the industry sector. In this regard, the role of macroeconomic factors is very important due to their impact on the growth environment and firm activity. Hence, the purpose of this research is to study the macroeconomic factors’ influence on the exit of manufacturing firms in the provinces of Iran (ISIC codes: 15-37) during the years 1996-2014 by using the spatial panel econometrics method. The results confirm the impacts of inflation, population, economic growth, and industrialization index of each province's economy on the exit of firms in the province and its adjacent provinces. The exit of firms in each province has also a negative impact on the exit of the firms in the adjacent provinces. Considering the role of macroeconomic factors on the exit of firms from the province and adjacent provinces, it is recommended to implement the regional policies which are in regard to the synergy of industrial production within and between provinces.