Interregional Business Travel and the Economics of Business Interaction

Abstract: This thesis consists of five individual essays, and a common introduction. The main theoretical focus of the study is to show that a firm’s choice to carry out a business interaction is based on its set of perceived business opportunities. Differences in domestic regional business attraction in Sweden are investigated within the framework of new spatial econometric tools, assuming that interregional business trips can be used as a proxy for regional business attraction. If a region has a growing number of new innovations and/or a number of entrepreneurs with profitable business opportunities, then more firms will establish business contacts with that region.A decision to make a business contact is related to the perceived profitability of such a contact and the profitability is correlated with the form of interaction chosen, where the choice is between an face-to-face (FTF) contact and a mediated contact. The arguments put forward are that the choice of FTF business contacts is associated with non-standardised information exchange and high transaction costs (net of travel costs). This implies that market and renewal activities are associated with a greater willingness to make an FTF contact than other activities. The empirical part of the study examines the generation and attraction of interregional FTF business interaction for a set of functional regions and for the Jönköping airport market area. The empirical part is based on two unique surveys with over 165 000 respondents. The empirical exercises show that the generation of interregional business trips is primarily market oriented. In addition, the analysis shows that the willingness to make a trip increases with the size of the establishment and is greater for the manufacturing industry than for other industries.A spatial interaction model between origin and destination pairs is also outlined and estimated. It is shown that the share of knowledge and service-handling professions in a labour market region influences both the generation and attraction of interregional FTF business contacts. The empirical analysis also shows that regions with high employment shares for growing industries tend to exert a positive attraction and to some extent also a generation of business trips. As a consequence, growing regions tend to attract more business trips than similar but stagnating regions.