Patisserie in the South of England will be higher quality than the North because there are more baker shops.
Many will argue with this – but there are good reasons why it’s probably true. It’s all in the data.
In Guildford, there are more than twice as many businesses per head of population as there are in Gateshead. Typically therefore, there will be twice as many baker’s shops on Guildford High Street as on Gateshead High Street.
What might this mean, beyond more employment opportunity in bakers, in Guildford? There are two crucial implications.
Firstly, there will be twice as many employees in Guildford’s baker shops thinking about starting a THIRD baker shop. And if each baker’s shop spawns another, the impact is considerable.
Currently, in Guildford, there likely to be two baker’s shops; in Gateshead 1. The baker’s shop gap is 1.
After the entrepreneurial rush to start another baker’s shop, there will be 2 in Gateshead and 4 in Guildford. The baker’s shop gap will have doubled to 2.
This is the profoundly important impact of the interaction of business start and business stock. It is very serious for those places with a small stock of businesses.
However, this is not the only implication.
When Family Guildford buys half a dozen profiteroles from one of the two bakers on the High Street, gets them home and finds they are not up to scratch – the family has a choice.
Next week it’s the competitor baker that gets Family Guildford’s cake business. Faced with the loss of custom, what is the first baker likely to do? Well the evidence suggests that she’ll head off to the local university and get some help innovating profiterole production. Having done that, and won business back, baker 2 will do the same …. and so the innovation / productivity roundabout turns.
In summary, business stock has a profound local economic impact – arguably, it’s the most important variable. It’s why encouraging business starts is crucial. It’s why worrying about the quality of business starts misses the point.