The pull effect of entrepreneurship on population growth in small municipalities

Purpose Rural areas face significant population decline, a trend that threatens their sustainability and requires attention. This study aims to explore the impact of entrepreneurship on population growth in small municipalities, addressing how local conditions, such as adverse geodemography, influence this relationship. Design/methodology/approach The model was developed and tested using data from 323,969 new companies created over seven years across all Spanish municipalities. The research employs a time-lagged design using partial least squares structural equation modeling (PLS-SEM) to test the relationships. Findings The results indicate a positive relationship between entrepreneurship and population growth. However, the pull effect of new ventures is weaker in large municipalities with alternative attractions and in very small municipalities, consistent with their inherent limitations. The effect is weaker in municipalities with unfavorable demographic conditions and, to a lesser extent, in those facing geographical challenges. Demographic aging reduces entrepreneurship's effectiveness in promoting population growth among young and female residents, but not in attracting immigrants. Practical implications Public policies promoting entrepreneurship and business creation should prioritize small-sized municipalities, as their potential impact exceeds that of large urban areas and very small municipalities. They should consider that aging demographics do not reduce entrepreneurship's ability to attract immigrants. Social implications By understanding the factors that enhance or hinder the pull effect of entrepreneurship, rural communities can better support sustainable population growth and local development. Originality/value This study provides new insights into how entrepreneurship can influence population growth in small municipalities, highlighting the importance of considering local conditions. The findings offer valuable information for policymakers in designing targeted strategies to mitigate population decline.