Routine Work, Firm Boundaries, and the Rise of Local Supplier Entry

TL;DR

This paper examines how boundary redrawing and routine work influence local supplier entry and firm formation patterns in the U.S. from 2005 to 2019.

Contribution

It provides empirical evidence linking routine work, boundary management, and increased local supplier entry, highlighting the role of place-bound outsourcing.

Findings

Routine employment share increases local business applications.

Entry is concentrated in micro-establishments with no quality gains.

Local supplier entry is driven by boundary redrawing, not displacement.

Abstract

Between 2005 and 2019, U.S. business applications rose 40 percent while conversion to employer firms fell by nearly half. We study whether boundary redrawing helps explain this pattern. Structured routine-cognitive work can be governed through deliverables and thinner buyer and supplier interfaces. When such work remains place-bound, outsourcing creates demand for domestic specialist suppliers. Across 722 commuting zones, a one percentage-point higher baseline routine employment share raises applications by 27.8 per 100,000 residents. Realized entry concentrates in micro-establishments, with no startup quality gains. Contract and industry evidence point to local supplier entry, not routine-manual displacement.