Will the opening of the metro promote local entrepreneurship? –A counterfactual test of Chinese urban data based on the model of synthetic control method

Abstract

The relationship between transportation infrastructure and entrepreneurship has been widely discussed by scholars. However, as an important transportation infrastructure, the impact of subway construction on entrepreneurship has been less studied. Based on the Synthetic Control Method, this paper takes the urban data of China from 2003 to 2017 as the research sample and uses the synthetic control method to study the influence of eight cities with subway service on entrepreneurship. The results show that: (1) The impact of subway openings on entrepreneurship varies across different cities. Specifically, it has a positive effect on entrepreneurship in Hangzhou, Zhengzhou, and Changsha, while it has a negative impact on entrepreneurship in Harbin and Ningbo. In the cases of Suzhou, Wuxi, and Kunming, the influence on entrepreneurship levels could not be conclusively established. (2) For cities where entrepreneurship activity increased following the opening of subways, further investigation revealed that subway openings did not directly stimulate entrepreneurship within transport-related industries. Instead, they indirectly boosted the entrepreneurial landscape in Hangzhou, Zhengzhou, and Changsha by accelerating the flow of resources and enhancing spillover effects within their respective advantageous industries. This study’s contributions are twofold. Firstly, it introduces innovative perspectives and methodologies for assessing the impact of subway systems on entrepreneurship, highlighting the differentiated effects observed across various cities and industries. Secondly, it emphasizes the importance of considering local advantageous industries in subway construction planning for government authorities, as this can maximize the subway’s potential to drive entrepreneurship in urban areas.