No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?
Abstract
Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between 60% and 80% of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.
... Because of the specific features of the economic fabric in extractive regions of less-developed countries, the analysis in this paper contrasts the effects of related variety on entrepreneurial activity outcomes in mining and non-mining regions in Chile. The focus on related variety as an enabling condition for entrepreneurship, and therefore for a potential entrepreneurship-based regional diversification process, is warranted in the light of evidence showing the importance of the industrial structure as an explanatory variable of regional differences in entrepreneurial activity (Glaeser and Kerr, 2009). Furthermore, recent studies show that industrial related variety favors productive entrepreneurship through a series of mechanisms through which a relatedly-varied industrial structure can facilitate the creation of thriving businesses, such as an eased identification of entrepreneurial opportunities, an eased access to specialized entrepreneurial resources, and a broad range of location economies from which early-stage businesses may benefit (Mazzoni et al., 2022;Content et al., 2019;Aarstad et al., 2016;Hidalgo et al., 2018). ...
... Human capital is one of the entrepreneurial resources new firms critically depend on, and is one of the most important factors in their cost structure (Glaeser & Kerr, 2009). Firms in regions with a greater related variety benefit from a local labor market that provide a larger pool of specialized labor, which eases the match between the skills offered by workers and the skills demanded by new firms in the regional economy (Asheim et al., 2011). ...
... However, in this paper we focus on related variety and regional entrepreneurial activity outcomes. In this sense, new firms' creation is a widely accepted and frequently used empirical metric of regional entrepreneurship (Faggian et al., 2019;Glaeser & Kerr, 2009;Low & Isserman, 2015), and the creation of a new firm has been conceptualized by some authors as "the entrepreneurial event" (e.g., Malecki, 2018). In Chile, the SII data indicate that around 97 percent of new firms are micro and small-sized firms, which suggests that small-scale entrepreneurship and not spinoffs of incumbent firms is what prevails in terms of new firms' creation. ...
A central question in Evolutionary Economic Geography is why regions differ in their ability to diversify and thus retain or expand their competitive position. Economic geography has generally tackled this question linking initial regional industrial structures with the emergence of new economic specializations. In this article, we argue that entrepreneurship is a key and largely overlooked mechanism of regional diversification, which has been shown to be eased by industrial related variety, but at the same time dampened by the weak linkages between the mining industry and the local economy. We analyze whether related variety is an enabling condition for entrepreneurship in mining regions. Using an unbalanced panel of around 187,000 new firms created between 2005 and 2011 in Chile, we show that related variety favors new firms’ creation, sales, and employment in non-mining regions, but not in mining regions. The results indicate that, due to the absence of pro-entrepreneurship effects of a relatedly-varied structure, mining regions face particularly challenging conditions for an entrepreneurship-based diversification process. Place-based policies attracting external knowledge, reinforcing territorial embeddedness of mining assets, and strengthening local absorptive capacity can help creating new development paths in mining regions driven by local entrepreneurs.
... Regional and urban studies has highlighted the importance of spatial context for selfemployment (Faggio and Silva, 2014;Haapen and Tervo, 2009). Existing studies have investigated whether self-employment is more entrepreneurial in urban areas than rural areas (Faggio and Silva, 2014;Tervo, 2008) and identified the factors that influence selfemployment and entrepreneurship in urban areas (Glaeser and Kerr, 2009;Glaeser, 2007). ...
... An 'urban premium' for entrepreneurial types of self-employment could firstly relate to benefits from agglomeration economies related to the spatial proximity to input suppliers and customers (Glaeser and Kerr, 2009). Cities also provide better and more infrastructures and services relevant for businesses including financial services that facilitate business startups and business growth (Eliasson and Westlund, 2013). ...
... A specialised local industry structure can specifically provide formal networks and access to potential clients, suppliers, collaborators and specialised services (Eliasson and Westlund, 2013). Diversity in terms of industry structure and people may promote informal learning processes such as 'learning by doing' (Glaeser and Kerr, 2009) across industries and thus enable the self-employed to establish their business. The spatial proximity to a large number of other self-employed individuals in urban areas could stimulate ideas for an own business and hence more opportunity-driven business start-ups (Andersson and Larsson, 2014). ...
Urban and regional research has focussed on opportunity entrepreneurship and how cities can promote growth through the ‘right’ type of entrepreneurship. This neglects the increasing risk of precarious self-employment reflected in the compositional change of self-employment towards self-employment with no employees (‘solo self-employment’). This paper tests whether precarious self-employment is more prevalent in urban areas, in parallel to more entrepreneurial forms as shown in previous research. Based on the European Working Conditions Survey 2015 and including 30 countries, it proposes a multidimensional empirical framework of precariousness of self-employment. Findings show significant variations in the prevalence of precarious self-employment in urban versus non-urban areas across geographical regions. Some individual characteristics (gender) and job-related characteristics (industry and working at home) are related with an increased risk of precariousness in urban areas. Policies therefore need to go beyond regulatory and legal frameworks and target local conditions of self-employment.
... However, the resulting reallocation of human capital in the aggregate labor market may create externalities that are beneficial to new startups, allowing them to acquire skillful workforce to grow. Studies on human capital have recognized the value of human capital to the entrepreneurial performance (Balsmeier et al., 2020;Glaeser & Kerr, 2009;Rosenberg & Nelson, 1994;Waldinger, 2016). In addition, the absorptive capacity theory of knowledge spillover (Acs ed. ...
... It is well documented that human capital is crucial to the success of entrepreneurship (Glaeser & Kerr, 2009;Rosenberg & Nelson, 1994;Waldinger, 2016). Equipped with well-rounded experiences and abilities, highly skilled human capital could help new startups perceive technological advances and hence identify growth opportunities (Ferreras-Méndez et al., 2015;Limaj & Bernroider, 2017;Nieto & Quevedo, 2005). ...
The present study uses patent data for US public firms from 1986 through 2018 to investigate the impact of large corporate sector innovation activities on new business creation at the county level. Consistent with the knowledge spillover theory of entrepreneurship, the results show that large firms’ inventive activities exhibit a positive relationship with new business formation in the local manufacturing sector, and the positive effect is significant to small startup firms. Further tests reveal that when inventing firms are financially constrained, the positive effect of their innovations on local new business formation becomes more pronounced. This study suggests that financial constraints of large corporates have positive externalities to the real economy, highlighting the importance of financial capital resources to the regional entrepreneurship process.
... The Number of incumbents is the natural logarithm of the number of incumbent firms active in the focal NACE4 industry and NUTS 3 region, as retrieved from ORBIS. In addition we control for agglomeration externalities due to the presence of buyers and suppliers (Alcacer and Chung, 2014; Dumais et al., 2002;Glaeser and Kerr, 2009). Supplier fit is the degree to which the structure of the local industries is in line with the supply needs of the focal industry, i.e. the degree to which the specialization pattern of the NUTS 3 region across industries represent the needs of the focal industry. ...
... For many such combinations we observe zero entries with no existing incumbents, and we also observe entries into industries with previously no establishments in the region. Following Glaeser and Kerr (2009), we therefore control for time-invariant industry and region influences by including separate sets of fixed effects for the NUTS 3 region, the NACE 4-digit level industry, and years. Table 1 presents the descriptive statistics and Table 2 The results of model 1 suggest that the positive association between the patent stock in the focal industry and new firm formation is relatively weak and statistically significant only at the 10% significance level. ...
Analysis of the relationship between knowledge spillovers and new firm formation in 980 NUTS-3 regions at the industry level shows that regional knowledge stocks represented by patents positively influence new firm formation, but that knowledge protection and appropriation strategies of incumbents discourage it. Knowledge stocks represented by trademarks translate into higher entry rates in the absence of a pronounced appropriation strategy of incumbents or when entrants do not directly compete with the trademarking incumbents. Our findings highlight the two-sided effects of trademarks: as an indicator of product novelties as well as a potential expression of strengthened incumbent appropriation strategies.
... Other studies that use agglomeration mechanisms simultaneously to explain variables such as the growth of industrial employment, the entry of new manufacturing firms, the degree of co-agglomeration of the industry and the location of firms, correspond to Dumais et al. [70], Glaeser and Kerr [71], Ellison et al. [72] and Viladecans-Marsal [73], Jofre-Montsey et al. [74] and Artz et al. [75], respectively. The pioneering work of Dumais et al. [70] stated that knowledge spillovers are the mechanism with the greatest incidence in the growth of industrial employment. ...
... The pioneering work of Dumais et al. [70] stated that knowledge spillovers are the mechanism with the greatest incidence in the growth of industrial employment. On the contrary, Glaeser and Kerr [71] concluded that the entry of new firms in an industry was higher in cities where industries that employ similar workers are more abundant. The co-agglomeration patterns of the industry as a function of the agglomeration mechanisms were examined in the work of Ellison et al. [72]. ...
Abstract
This investigation seeks to explore the importance of agglomeration mechanisms in the location decisions of new manufacturing firms in Ecuador, based on sector and canton level data for the 2000–2010 period. A model is proposed to explore the relative importance of agglomeration mechanisms in location decisions of new manufacturing companies, a regression is performed using instrumental variables, the econometric estimation is developed, and an identification strategy is proposed. The results of the empirical analysis show that the learning mechanism, and history, have a positive and significant impact on the creation of new firms. An increase of 1% in the transfer of knowledge in the industries and cantons of the country is correlated with the increase in the location of new firms in the order of 9.2%. In turn, history has a positive and significant effect on the creation of new firms, in industries and cantons characterized by a past industrial environment. Even when the learning mechanism and history are controlled by provinces, sectors, and cantons, they continue to be the most important determinants of the location of new firms. This evidence could be attributed to the public investment in Ecuadorian industry in recent years. In this sense, the contribution of this work is found in the empirical distinction of the mechanism that favors or inhibits the location decisions of new companies. The analysis was replicated for a three-digit sectorial disaggregation level, to verify whether the agglomeration mechanisms operate differently on a different industrial scale. The results suggested that there were no differences to be considered. When the analysis was done excluding the cantons of Quito, Guayaquil, and Cuenca, given their high representation in terms of the birth of industries and employment, the results were consistent with those previously mentioned. However, it is so only with respect to history, which in this case accounts for 38.8% of the birth of firms; whereas, matching accounts for an order of 38.9% in the period of analysis. This result is explained in the context of the country’s industrial policy. View Full-Text
Keywords: agglomeration; location; agglomeration mechanism; agglomeration economies; new firms; cantons of Ecuador
... The size of each fragment is 1 × 1 unit. In practice, the spatial distribution of the employees, agglomerations is not as regular as Y matrix (Combes and Overman, 2004;Glaeser and Kerr, 2009). Therefore, from the two-dimensional space 300 fragments were sampled using uniform distribution. ...
... Studies on entrepreneurship have shown that new firm founders tend to come from the local area and same sector as the firm founded (Dahl and Sorenson, 2012;Guzman, 2019). Moreover, local conditions have been found to explain a large portion of new business entries (Glaeser and Kerr 2009). Thus, it is reasonable to think of the new business launch choice in terms of the current wage under fulltime employment and the expected profits as an independent entrepreneur in the entrepreneur's current location. ...
... A diversity of definitions notwithstanding, entrepreneurial spirit as a subset of entrepreneurship is not rarely discussed in conjunction with risktaking, innovation, proactivity, and long-term strategic planning (e.g. Covin & Wales, 2012;Glaeser & Kerr, 2009). Its value to cities is well recognised, due to its connection to, and substantial impact on, the development of a city's competitiveness in the world (Pawitan et al., 2017). ...
The identity of a city matters in a global age. This article explores the discursive construction of the global city’s identity in relation to semiotic landscape, using the construction of Shanghai as a global city as a case study. In this increasingly globalising world, Shanghai authorities have recently demonstrated the desire to establish itself as a global city. Under the assumption of city agency in the semiotic practice of public signage, the signs photographed on site at Pudong International Airport of Shanghai were analysed from a critical perspective of multimodal discourse analysis, focusing on identity building for unique selling propositions. Questions addressed include what the identity of the global city looks like in Shanghai and how Shanghai is semioscaped as a global city and thereby its ethos implicitly represented. The findings suggest both global convergences and local particularities in the semioscaping of Shanghai as a global city. It argues that this way of identity building is attributable to the negotiation and contestation of power subject to the social norms, ideologies of a specific city.
... Clusters are geographic agglomerations of companies, suppliers, service providers, and associated institutions in a particular field, linked by externalities and complementarities of various types (Porter, 1990(Porter, , 1998. The presence of strong clusters enables companies to achieve higher productivity and raises regional performance (Feldman and Audretsch, 1999;Glaeser and Kerr, 2009;Stern, 2010a, 2010b). ...
In economics, "competitiveness" remains a very general concept, and its use in applied research does not allow combining their results and making unambiguous conclusions. This process is also complicated by the fact that the concept is composite and has two components – the price competitiveness and the value competitiveness. The latter can serve as an indicator of qualitative changes in the economy. However, this aspect of competitiveness in developing countries is still disregarded by researchers. Therefore, it is safe to say that today there are no studies, which, with a high level of accuracy, can analyze the value competitiveness of exports in such countries. Economists usually focus their efforts on the analysis of export price competitiveness and one of its main factors, which is the exchange rate of the national currency. However, this approach has limited cognitive capabilities, because the emergence of new centers of global growth, such as China and India is impossible to explain, based only on the high price competitiveness of their exports. The article attempts to solve some accumulated problems in economic science. In particular, based on the results of the analysis of modern definitions of the concept of "competitiveness", the author proposes to expand its content, generalizing the level of conformity of goods (services) to consumer preferences of market participants. This conceptual position is used to deepen the understanding of the basic, value and price competitiveness of products. A method for assessing the dominant role of value (price) competitiveness of exports in ensuring its dynamics has been developed. According to the results of the of methodology, it was found that in Ukraine’s export markets, the cyclical process of alternating growth of value or price competitiveness of this country’s products is mostly interrupted. The reason for this is the high price competitiveness of raw material exports, which is mainly attained due to low wages in the economy. In international markets, value competitiveness is inherent in a relatively small number of product groups of Ukrainian products. These include: insulated wires, cables and other insulated electrical conductors; fiber optic cables; turbojet engines, turboprop and other gas turbines; weapons, ammunition, their parts and accessories; electric heating devices and apparatus; vessels intended for the carriage of persons or goods; tugs and pushers; parts of aircraft; cars for transportation of passengers, cargoes, including self-propelled ones; water steam turbines and other steam turbines; and women's and men's clothing. It is substantiated that from the point of view of finding a new strategy of economic growth for Ukraine, the most urgent issues are not those of intensifying export activities, but those of updating the composition of the largest export commodity groups. Leading positions among them should be occupied by goods with a large share of value added, and increased technological complexity and value competitiveness. The beginning of this process will mean the emergence of new qualitative changes in the economy, and the effectiveness of public policy of economic reform.
... (1) (Baumol, 1996;Glaeser & Kerr, 2009). ...
A pesar de la notoria importancia que la actividad minera posee para explicar el crecimiento del producto nacional, existe aún un amplio debate acerca del protagonismo que cumple para promover el desarrollo local, principalmente, en la dinámica empresarial y los eslabonamientos en el entorno local. Esta investigación analiza el impacto de la actividad minera sobre la dinámica empresarial y la diversificación productiva en los territorios mineros y aledaños para un periodo que inicia desde el 2007 al 2018, utilizando técnicas de evaluación cuasi-experimentales. Entre los principales resultados se destaca que el estimulo económico que genera la presencia minera incrementa la especialización de las empresas de los distritos mineros e incrementa la diversificación de las empresas en sus distritos vecinos. Asimismo, se reconoce que la presencia de Centros de Innovación y Transferencia Tecnológica (CITE) intensifica el efecto de especialización generado por la minería. Por otro lado, los resultados del estudio revelan que la minería promueve el desarrollo empresarial en sectores eslabonados a su cadena productiva en los distritos mineros incrementando sus ventas y número de trabajadores, pero relega el desarrollo de las empresas que pertenecen a otras actividades en la zona. Finalmente, no se encuentran resultados robustos que evidencien que la presencia minera intensifica la entrada o salida de empresas en los distritos mineros o en los contiguos.
... (1) (Baumol, 1996;Glaeser & Kerr, 2009). ...
A pesar de la notoria importancia que la actividad minera posee para explicar el crecimiento del producto nacional, existe aún un amplio debate acerca del protagonismo que cumple para promover el desarrollo local, principalmente, en la dinámica empresarial y los eslabonamientos en el entorno local. Esta investigación analiza el impacto de la actividad minera sobre la dinámica empresarial y la diversificación productiva en los territorios mineros y aledaños para un periodo que inicia desde el 2007 al 2018, utilizando técnicas de evaluación cuasi-experimentales. Entre los principales resultados se destaca que el estimulo económico que genera la presencia minera incrementa la especialización de las empresas de los distritos mineros e incrementa la diversificación de las empresas en sus distritos vecinos. Asimismo, se reconoce que la presencia de Centros de Innovación y Transferencia Tecnológica (CITE) intensifica el efecto de especialización generado por la minería. Por otro lado, los resultados del estudio revelan que la minería promueve el desarrollo empresarial en sectores eslabonados a su cadena productiva en los distritos mineros incrementando sus ventas y número de trabajadores, pero relega el desarrollo de las empresas que pertenecen a otras actividades en la zona. Finalmente, no se encuentran resultados robustos que evidencien que la presencia minera intensifica la entrada o salida de empresas en los distritos mineros o en los contiguos.
... e.g. Evans & Leighton, 1989;Quadrini, 1999;Gentry & Hubbard, 2004;Cagetti & De Nardi, 2006;Glaeser & Kerr, 2009 ). Newer studies, on the other hand, show that these are biased measures of innovative Schumpeterian entrepreneurship -across countries, between industries, over time, and in terms of individual attributes (Henrekson & Sanandaji, 2014;Hurst & Pugsley, 2011). ...
One of the challenges of studying entrepreneurship is the lack of longitudinal data. One way to address this is through a promising new statistical approach called prosopography, where standardised biographies of prominent entrepreneurs are systematically compiled and analysed using quantitative methodology. This method combines the detailed information available in biographies at the micro-level, with a macro-level systematic approach – an approach that, notably, has been previously applied to Italy. Here, we compile a dataset of 267 Swedish entrepreneurial biographies that focus on individuals active from the early 19th century until the present day. We find five distinctive clusters of entrepreneurs. Innovation intensity appears to be important, and, as expected, inventors represent a distinct cluster in Sweden. Other results are more novel, and in part go against the conventional view of Sweden as an industrial economy. For instance, many Swedish entrepreneurs, of both sexes, have developed what are best described as advanced service innovations, and stand as sole founders of the ventures. The institutional context clearly affects the type of entrepreneurs that emerge, but there is also evidence of interaction and reverse causation where prominent entrepreneurs have influenced the institutional development of Sweden. As a result, there is a hybrid version of capitalism combining high redistributive taxes with free market capitalism and ample room for Schumpeterian entrepreneurs as well as dynastic entrepreneurs – thereby also combining private wealth creation with distribution. While one of the world’s least family -oriented cultures, high -impact Swedish entrepreneurs are surprisingly dynastic in their entrepreneurial endeavours.
... Estudios previos referidos a las condiciones microeconómicas destacaron la importancia de los siguientes aspectos: (a) los clústeres como propiciadores de alta productividad y gestión de conglomerados sectoriales (Feldman y Audretsch, 1999; Glaeser y Kerr, 2009 y Ketels, Lindqvist y Sölvell, 2012); (b) la gestión de la innovación (Megginson y Netter, 2001); (f) la gestión de las operaciones y la manufactura (Corbett y Van Wassenhove, 1993;Mehra, 1998;Rao y Holt, 2005; Russell y Taylor, 2006) y (g) la rivalidad e interacción entre empresas (Feldman y Audretsch, 1999;Glaeser y Kerr, 2009y Porter, 1998. ...
... The hypothesis is that urbanization, combined with a greater spatial density of economic activity, also brings greater proximity to suppliers and customers, better access to the market, and thus the benefits of agglomeration on costs and productivity for each individual enterprise. This "Marshallian" conceptualization underlies much of the recent work on the benefits of agglomeration in industrialized economies (Glaeser & Kerr, 2009;Jofre-Monseny et al., 2011;Dauth 2011). Doubling the size of cities could even lead to an increase in productivity of about 3% to 8% (Rosenthal & Strange, 2004). ...
This study empirically analyses the influence of urbanization and the participation of men and women in the labour force on economic growth in the countries of the West African Economic and Monetary Union (WAEMU). Using data from the World Bank (2017) on the member States between 1990 and 2016, we show from Pesaran’s PMG estimator, Shin and Smith (1999) that in the short term, youth and women are very useful for economic growth. In the long term, urbanization, industrial added value and the elderly make a positive contribution to economic growth. The study urges governments to create better living conditions by ensuring adequate income levels and care, i.e., public policies should aim to increase employment, establish or improve social protection, social integration, health and the fight against discrimination.
... It would also important for entrepreneurs to figure out where they located their start-up (Ellison et al., 2010;Glaeser & Kerr, 2009). Researchers had deliberated on this and advocated that an NBV should be located in locations where the desired advantages for running the start-up were available (Chatterji et al., 2014;Ellison & Glaeser, 1999;Glaeser et al., 2010). ...
Strategic management (SM) of new business ventures (NBV) has been gathering steam in SM literature over the years. SM in the context of an NBV has its own set of challenges and growth propositions. Given this fact, SM for NBVs require a dedicated treatise in terms of conceptual treatment. The author in this conceptual work develops and integrates perspective regarding SM for NBVs. The author undertakes a review and synthesis of literature to arrive at a set of tables and figures providing an integrated view on SM in NBVs. The author undertakes this through logical argumentation and incremental theorization. The author systemizes the literature into different dimensions and clusters. The author thus contributes to the field of SM because of enhanced conceptual understanding on SM for NBVs. Managers involved in NBV firms would get help in asserting what steps need to be undertaken towards successful SM of NBVs.
... Several studies document that entrepreneurs tend to disproportionately found their companies in their regions of birth (Audretsch et al., 2012;Figueiredo et al., 2002;Michelacci & Silva, 2007). Glaeser and Kerr (2009) document a clustering phenomenon for entrepreneurship, and Delgado et al. (2010) provide more details in the shape and content of these clusters. They find the presence of complementary economic activity creates Marshallian externalities that enhance incentives and reduce barriers for new business creation. ...
Using data from a large public research university in the United States, we examine the relationship between the characteristics of undergraduate college students’ regional origins and students’ interest in entrepreneurship. We find that several entrepreneurial indicators of students’ regional origins predict students’ entrepreneurial intent and ideation. One possible explanation for our results is that the extent of entrepreneurial activity in a region may imprint attitudes towards entrepreneurial careers on people growing up in those regions. Our findings suggest the composition of admitted students’ geographical origins may impact the entrepreneurial focus of universities’ student bodies.
... Indeed, previous empirical research show that new firm formation is strongly influenced by the presence of related industries (see e. g. Acs and Armington (2004), Acs et al. (2007), Kerr (2009), andDelgado et al. (2010)). Frenken et al. (2007) distinguish between related variety, as described above, and unrelated variety, which broadly corresponds to Jacobs externalities. ...
Building on the neo-endogenous rural development model and the resource-based view of the firm, this paper investigates the role of place-based amenities for new firm formation. Empirically, we employ a full-population dataset encompassing new firms in Sweden from 2009 to 2016, combined with geocoded datasets with the spatial distribution of nature- and culture-based amenities. The results show that local amenities are indeed important factors in determining the rate of new firm formation. Estimating the model across urban and rural neighborhoods show that amenities are relatively more important in explaining new firm formation in rural areas as compared to urban. As such, our study contributes to the literature on diversification of the economies of rural areas by pointing at the important role that place-based amenities may play for an entrepreneurially-driven development of less developed and/or rural areas.
... The spatial proximity effect identified in the empirical findings could be taken to echo Marshallian theories of location choice (Glaeser and Kerr, 2009;Jofre-Monseny et al., 2011;Parker, 2004). The phenomenal rise of agglomeration/Marshallian theories in cultural tourism research has coincided with (or perhaps been triggered by) an ongoing globalisation in the sector (Smith, 2003;Grabher and Powell, 2004) and a corresponding rise in post-Fordist forms of economic activity (Scott, 2000;James and Sunley, 2006). ...
This paper examines the effect of a number of individual attributes and characteristics on respondents’ intentions to support local cultural entrepreneurship ventures in the Abu Dhabi Emirate of the United Arab Emirates (UAE). The objective of the discussion is to capture the effect of a number of individual variables (such as age, gender, and place of residence) as well as tourism phenomena (repeat visit, time of visit) on the importance tourists in Abu Dhabi place on culture and cultural resources. Using binomial probability models, we measure how changes in age, income levels, length of stay, and other variables trigger changes in cultural appreciation among visitors in Abu Dhabi. This approach is based upon a natural extension of the bivariate descriptive analysis usually undertaken in the literature (Zaidi, 2001).
... W it captures other locational characteristics that affect the location choice of a startup, including population density, median household income and the percentage of working population at the census tract level, and zipcode fixed effects. These demographic and socio-economic factors have also been found to significantly affect new businesses' locational choice in prior studies (Armington and Acs 2002;Glaeser and Kerr 2009), and thus included in the regression. a t denotes year by quarter fixed effects to control for any remaining time-dependent variations, and ε i t , denotes the error term. ...
We examined the impact of coffee shops on entrepreneurship. Matching Google Reviews for coffee shops posted from 2016 to 2018 with nearby establishments in the state of Maryland, we found that one mile closer to the nearest three coffee shops, an establishment is 10.1 percent more likely to be a startup than an incumbent company. Coffee shops with a higher proportion of reviews related to social interaction, and those with better space quality and locational accessibility are more likely to be surrounded by startups. We identified specific features of urban third places that planners can cultivate to encourage or attract entrepreneurship.
... Second, our research adopts the resource dynamics perspective to understand the coevolution of IEs and KIEs, which contributes to extant research on the spatial allocation of entrepreneurship (Glaeser & Kerr, 2009;Zheng & Zhao, 2017). Regarding the overall value creation and allocation of entrepreneurial activities, several recent studies focused on relationships developed among different actors, which have a particular interest in how entrepreneurial enterprises interact with other actors to access the necessary knowledge. ...
Knowledge-intensive enterprises (KIEs) play a significant role in creating value in larger ecosystems by exploiting innovative opportunities. The survival and development of KIEs significantly rely on the resources that they can obtain from heterogeneous regional endowments. However, few studies have investigated KIE development in relation to the evolutionary characteristics of the external environment under a specific regional context. Adopting the lens of ecosystems and a processual approach, using a case study of China’s IC design industry, the present study explores how KIEs coevolve with innovation ecosystems over time. More specifically, our case study reveals the mechanism by which KIEs benefit from innovation ecosystems by responding to changing resource dynamics over the course of ecosystem development, which in turn facilitates and shapes the development of KIEs into either market-oriented growth or technology-oriented growth paths. The theoretical contribution and practical implications based on our findings are discussed.
... Besides addressing the impact of numerous determinants, scholars have studied new firm formation from both macro and micro perspectives (for useful summaries, see Acs and Armington 2004;Johnson and Parker 1996). The literature has also examined the spatial variations in business formation rates (Johnson 2004), both across countries (highlighted by the Global Entrepreneurship Monitor study; see Reynolds et al. (2002)) and within countries (Bishop 2012;Glaeser and Kerr 2009). ...
We evaluate the impact of corruption on firm births in the formal sector in the 32 Mexican states. In addition to controlling for socioeconomic factors previously linked to entrepreneurship, we also evaluate the impact of corruption and corruption squared in each of the Mexican states with both spatial and non-spatial models. Our results show that corruption is positively correlated with the formation of new formal-sector firms, but corruption squared is negatively correlated with firm formation. We believe this implies that some corruption helps entrepreneurs navigate complex rules and bureaucracy but too much corruption hinders entrepreneurship. We find a strong spatial component to new firm formation.
... Consequently, the division of production into stages, each carried out by different companies, usually leads to a gradual increase in the levels of professionalism and specialization as a result of the continuous development of new, more efficient and effective techniques, which supposes an opportunity for new incoming companies when there is increased demand [61]. Thus, the productive specialization of clusters allows for increased opportunities for learning, innovation, and entrepreneurship [62]. ...
Research into entrepreneurship has gradually changed its perspective over recent decades, becoming a very relevant research topic. In the last few years, various lines of research have been developed to find new explanatory factors of entrepreneurial propensity in specific socioeconomic and institutional contexts, among which we can highlight local territorial agglomerations. The main objective of the study is to offer new knowledge about the factors that influence the entrepreneurial capacity of food and beverage clusters using different secondary sources. To reach this objective, we analyze how the degree of agglomeration, institutional thickness, and knowledge affects new companies created in the last five years within the 37 food and beverage clusters in Spain. Multiple regression results show that company agglomeration and the presence of supporting institutions positively influence entrepreneurial capacity in these clusters. However, available knowledge has a negative influence on entrepreneurial capacity in these specialized environments.
... Strategic approach through geographic agglomeration of related and supporting industries in maritime clusters has become a multisectoral process that enables an improved articulation, co-location synergies, economies of scale, and sustainable integrated management of sea ecosystem resources (Glaeser and Kerr 2009;Delgado et al. 2012;Stern 2014, 2010;Monteiro, De Noronha, and Neto 2013;Osarenkhoe and Fjellström 2017). ...
Maritime industry clustering has in recent years gained attention as a tool for strategic global and regional economic competitiveness policies owing to their co-location synergies and agglomeration economies. The Nigerian maritime sector is known to have a large maritime industry comprising shipping and logistics firms, shipyards, ship consultants, and a suite of other firms, institutions, and associations with maritime functions. However, nothing is known about the structural characteristics and environmental dynamics of this significant cluster. This article, capitalising on critical and meta-analytic review of studies and conceptual modelling, explores for the first time the Nigerian maritime industry from a cluster perspective underpinned by foundational competitiveness of Nigerian microeconomic performance. It further evaluates broadly the quality of the Nigerian business environment, highlighting the challenges and opportunities for strategic foresight decision-making. Targeted recommendations predicated on cluster-specific characters are provided to improve cluster competitiveness.
Economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism. To empirically investigate its impact, we construct local measures of household wealth inequality based on financial rents, home equity, and 1880 farmland. We identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 Homestead Act or US states’ removal of “death taxes”. Wealth inequality decreases firm entry and exit, and the proportion of high-tech businesses across metropolitan statistical areas. There is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary. Income per capita consequently grows more slowly.
The objective of this paper is to estimate the relationship between agglomeration economies and the birth of new firms in U.S. manufacturing sectors during 2004–2012. I examine the variations in Marshallian factors across MSAs and across counties within MSAs. My findings support the existence of Marshallian agglomeration forces: input sharing, labor market pooling, and knowledge spillovers, with input–output linkages particularly important. I then examine the variations in Marshallian factors across regions and find regional differences are not very strong. In addition, large‐sized firms appear to be more responsive to a supplier‐customer relationship. Moreover, my empirical results provide evidence that firms in highly concentrated industries react more to input linkage and labor pooling.
New firm formation is essential for the continuing vitality of the modern economy. A higher entry rate of new businesses is a fundamental driver of sustainable economic growth (Djankov et al. 2002). The spatial distribution of new start-ups however is uneven and thus a significant explanation of regional economic disparity (Stam 2010). Silicon Valley appears more entrepreneurial than the declining cities of the Rust Belt in the USA (Glaeser and Kerr 2009). A distinct spatial difference of new start-ups exists in India (Ghani et al. 2014). Likewise, some coastal cities in China appear more active in new firm formation than inland cities. To explain why new firm formation is spatially uneven, previous studies have mainly focused on individual characteristics of potential entrepreneurs such as their location choice preference, age, sex, and educational level (Cooper and Folta 2000; Stam 2007; Michelacci and Silva 2007; Bates 1990; Armington and Acs 2002; Delfmann et al. 2014; Elert 2014). However, it would be difficult for talented entrepreneurs to start a business without favorable external environment (Stam 2010).
Purpose
This paper aims to explore a new model to manage small and medium enterprise (SME) clustering process that examines the geographical connectivity conditions within the existing theories on agglomeration. The presented work explores the dynamics governing the decisions related to both the duration and frequency of the different forms of these new clusters.
Design/methodology/approach
A clustering configurator tool is developed to assist managers for the best temporary cluster model. The configurator considers aspects related to the market, industry and classical clustering requirements as well as social capital (SC). Finally, the performance of various temporary clusters under different demand scenarios and operational conditions are studied using numerical simulation.
Findings
The results examined the performance of the new clusters under various internal and external defining indicators against potential economic growth, technology spillover and the new metric of SC. The results offered interesting observations suggesting various recommendations to promote these new models to SMEs as well as how to better manage them.
Research limitations/implications
The presented results are understood in the context of the suggested settings of relationships and scoring weights.
Practical implications
The new form of clusters will help SMEs overcome the feasibility challenge when considering re-locating to existing clusters while reaping many of these clusters benefits. Furthermore, different recommendations for management aimed at enhancing clustering decisions and the efficiency of SMEs in these new setups are presented.
Originality/value
This paper suggests a new clustering management approach that capitalizes on the temporal domain rather than classical space or the digital clusters domains. Also, a new management concept called dynamic matching is suggested. SC is considered among clustering objectives which was disregarded in similar studies.
Mounting evidence suggests that current regional entrepreneurship can be explained largely by historical entrepreneurship. Our research shows, however, that entrepreneurship can be fostered by historical events, such as the establishment of ports in China in 1842, which at the time were based mainly on agriculture. Moreover, historical entrepreneurship may even have originated from these historical events. By altering regional entrepreneurial culture, human capital and the transportation system, historical ports that opened up to 170 years ago can significantly predict current regional entrepreneurship. We strengthen our conclusion by mitigating the potential selection bias of historical ports and introducing several robustness tests.
Using high-speed railway (HSR) construction in China as a quasi-experiment, this paper contributes to the understanding of how transportation infrastructure affects entrepreneurship. On the basis of a difference-in-difference approach, we find that access to an HSR connection leads to an increase in entrepreneurship by approximately 3.5 percentage points (35% of the mean). Mechanism exploration suggests that market potential is the main channel that HSR encourages entrepreneurial activities, which is realized by accelerated information sharing and face-to-face interactions. And the effect is bigger for high-educated families, wealthy families and in large cities.
We test whether the relationship between finance and growth is present in 48 countries over 20 different periods of an equal length of 15 years, starting in 1980 (to 1995) and ending in 1999 (to 2014). We estimate growth regressions using an IV approach and we find that (1) overall financial development had a positive effect on economic growth for almost all our studied periods, (2) the legal system is the primary determinant of the effectiveness of the overall financial system, and (3) financial services were relevant for economic growth even during the financial crisis of 2008. This research is part of a research agenda revisiting the finance–growth nexus using up-to-date empirical methodologies.
In this study based on evolutionary game theory and data on conditions in China, we determine the main factors affecting business entrepreneurship and innovation entrepreneurship. We consider internal and external perspectives regarding entrepreneurship–institutional quality and foreign direct investment (FDI). Accordingly, we find that institutional quality has a positive effect on nurturing entrepreneurship, especially business entrepreneurship, and FDI does not effectively stimulate entrepreneurship, particularly innovation entrepreneurship. With regard to spatial heterogeneity, in different regions, institutional quality and FDI have diverse effects on fostering entrepreneurship. According to the trend analysis, we find that the relationship between FDI and entrepreneurship takes an inverted‐U shape, in contrast to the relationship between most types of institutional quality and entrepreneurship. When FDI and institutional quality jointly cultivate entrepreneurship, the interaction between them is not effective. Moreover, we find that institutional quality affects entrepreneurship mostly through the channels of economic growth, the scale of the home market, and industrial upgrading. By contrast, FDI does not effectively affect these channels to further foster entrepreneurship. These conclusions not only enrich the literature on entrepreneurship but also offer insights into how entrepreneurship can be stimulated in China and the rest of the world.
This article investigates whether differences in business entry and exit rates explain differences in average, municipality-level labor productivity in the micro- and small-firm (MSF) sector. We focus on the case of Chile, exploiting an exogenous source of variation to exit rates—an exceptional event when the tax authority closed tens of thousands of ostensibly inactive firms in 2003—to instrument metrics of business dynamism in regression models of labor productivity. Pooled and panel instrumental variable (IV) estimations confirm that even the sector comprising the smallest firms in a less developed country can raise its productivity in the face of increased competition, knowledge inflows, and the release of resources.
The relationship between energy policies and entrepreneurship has long been a keen interest of researchers and policymakers. This study seeks to understand whether and how public policies affect—promote or hinder—the founding of new firms by examining the impact of solar regulatory and financial incentive policies on two types of new firm formation (i.e., start-ups and new subsidiaries) in the U.S. solar photovoltaic (PV) installation industry. This study finds that favorable regulatory policies are associated with an increased number of 2.8 start-ups and 1.6 new subsidiaries, and restrictive regulations (i.e., licensing policies) are associated with 2 fewer start-ups and 0.5 fewer new subsidiaries in a state. This study also finds that third-party ownership policy seems to have no impact on new firm formation. Furthermore, the relationship between financial incentives and new firm formation is not robust. This study suggests that policies that create a favorable business environment (or increase the barriers to business entry) may benefit (or hinder) different types of firms to varying degrees, as firms may have different levels of motivations, incentives, resources, and capacity to leverage these policies. Therefore, the distributional implications of policies should be taken into account in policy designs.
The purpose of the article is to assess the possibility of using cluster policy in Russia’s industry as an instrument for developing dynamic competition (encouraging innovation activity). Drawing on the results of a detailed systematic review of the cluster theory, the author identifies the reason for its weak operationality: an implicit premise on entrepreneur’s passive role in the innovation process. He then attempts to remove this premise by explaining the motives of company's behavior through a modified product variety model which is tested on empirical data from the U.S. and Russia. The results of testing show that at similar level of economic activity the geographical concentration of industrial enterprises in a cluster contributes to the intensification of innovation processes. A relatively more competitive behavior of firms in a cluster is explained through the theory of industrial markets and new institutional economic theory. The analysis concludes with valuable recommendations for economic policy.
Entrepreneurship is a localised process that relies on local institutions, resources, and networks. Interactions between agents in the space may have their origins in the domestic milieu, but they may also draw their roots from international economic linkages. Yet, there is a surprising lack of research that combines economic geography, international trade, and entrepreneurship literature to address these issues at the local level. Our study fills this gap by examining the effects of manufacturing export diversification (extensive margin) and specialisation (intensive margin) on firm entry, survival, and growth within and across cities and towns. Spatial econometric techniques are applied to firm population data from a small and open economy over the period 2007–2017. Extensive margin is identified as the main channel of influence on local entrepreneurial outcomes in manufacturing, but the impact on firm survival and growth in other localities is negative. Manufacturing export margins also impact entrepreneurial outcomes in other sectors of the local economy.
Hundreds of state and local policies support the deployment of residential-scale solar photovoltaic systems in the United States. Policy differences across jurisdictions may explain differences in local photovoltaic industries, such as the number of competing installers, the distribution of market shares among those installers, and the market shares of large national-scale installers in local markets. This paper explores this hypothesis through a novel econometric model, the results of which suggest that various state and local policies indeed shape emerging photovoltaic industries. The results suggest that policies that generate higher customer electricity cost savings yield markets with more installers while higher levels of up-front photovoltaic subsidies produce markets with fewer installers. Further, both up-front subsidies and ongoing incentives yield markets where national-scale installers hold less market share. These results indicate that policies have long-term indirect impacts on photovoltaic markets by shaping nascent installation industries. Policymakers could use the results to identify and design policies that help raise infant installation industries to maturity.
Entrepreneurship is an important determinant of innovation and growth with an uneven spatial distribution. In addition, the mechanism of entrepreneurship is affected by administrative hierarchies. However, the driving forces behind the spatial differences are not clear. Therefore, this study aims to examine the key determinants of entrepreneurship by clarifying the roles of localisation economies and intellectual property rights (IPRs) protection from 2008 to 2017 using a Bayesian analysis of multi-level spatial correlation. The empirical results indicate that localisation economies and IPRs protection have a major influence on entrepreneurship. In particular, the role of localisation economies at prefecture level is important, because the impact of supplier linkages at provincial level is negative, although it is insignificant. The effects of IPRs protection at both prefecture and provincial levels are significant in all the models, and its effect increases with the improvement in model performance. Moreover, these determinants vary across different spatial scales.
Employees with relevant knowledge and skills for digitalization have become increasingly important for the competitiveness of MNCs. However, the shortage of such digital human capital in many host countries is putting pressure on MNC subsidiaries to prevent these employees from leaving. We theorize that the retention of digital human capital in MNC subsidiaries does not merely depend on salaries but crucially on the learning opportunities that subsidiaries offer. By integrating mechanisms from the literature on subsidiary-specific advantages into theoretical models explaining voluntary mobility constraints of employees, we reason that the opportunities for acquiring new skills in subsidiaries with advanced digital expertise will reduce the odds of losing these valuable employees. We test our theoretical predictions for 11,598 employees with digital human capital working for 866 foreign MNC subsidiaries in Denmark observed between 2002 and 2012. We find that digital expertise helps retaining digital human capital. The effect is stronger if subsidiaries have an internationally diverse workforce and when they possess patented technologies. Both factors provide distinct learning opportunities from digital expertise. The effect is weaker if the subsidiary is located in regional clusters of digital expertise since alternative employers may offer similar learning opportunities.
This case presents how entrepreneurial storytelling assists entrepreneurs in attracting new investors, pursuing innovation and developing resilience in the Palestinian Territory. It also examines the role of entrepreneurial storytelling in eluding political crises and supporting the CEO’s vision to adapt changes in the political environment. Moreover, this case explains how entrepreneurs respond to local competitors who operate in the same uncontrollable and
unpredictable environment. The case is written based on three semi-structured interviews (total seven hours) with the Chief Executive Officer of Pharmacare Pharmaceuticals Public Limited Company (PCP): Mr Bassim Khoury (BK). PCP is the third Palestinian
pharmaceutical company in terms of turnover in 2021, with more than 100 products and 330 employees, and is the first company in the Palestinian Territory to expand internationally in 22 countries.
The purpose of the article is to assess the possibility of using cluster policy in Russia’s industry as an instrument for developing dynamic competition (encouraging innovation activity). Drawing on the results of a detailed systematic review of the cluster theory, the author identifies the reason for its weak operationality: an implicit premise on entrepreneur’s passive role in the innovation process. He then attempts to remove this premise by explaining the motives of company's behavior through a modified product variety model which is tested on empirical data from the U.S. and Russia. The results of testing show that at similar level of economic activity the geographical concentration of industrial enterprises in a cluster contributes to the intensification of innovation processes. A relatively more competitive behavior of firms in a cluster is explained through the theory of industrial markets and new institutional economic theory. The analysis concludes with valuable recommendations for economic policy.
This paper investigates whether temporary subsidies to the manufacturing sector at an early stage of structural transformation stimulate economic development. We study the “Construction of Third Front” (TF), a massive yet short-lived industrialization campaign in China's under-developed hinterland. Motivated by defense considerations, location choices of TF projects followed a peculiar set of criteria, which generates plausibly exogenous variation in manufacturing capacity before market reforms started in the mid-1980s. We find initial advantages in manufacturing have long-run positive effects on the structural transformation of the local economy. The effects are driven by new entrants in the private sector, consistent with the existence of local agglomeration economics. However, there is no evidence that agglomeration forces are stronger in initially less-developed regions. While the TF reduced regional inequality, it likely hurt the aggregate efficiency.
After the 1970s crisis, economies of scale lost its importance and large firms faced with serious economic difficulties. Globalization and advancements in information and communication technology (ICT), which considerably reduced the transaction cost of information and capital, led the competitive advantage to move from large establishments to smaller and more innovative firms. Since the mid-1970s, share of small and innovative firms has begun to increase in almost all industries and in the economy as a whole. Especially, with the seminal work of Birch (1987) pointed out that small and medium sized enterprises are important vehicles for creating new jobs, the interest on SMEs and entrepreneurship has begun to gradually raise. Meanwhile, increasing evidence on the positive contribution of entrepreneurship on regional economic development and growth has led researchers and policy makers to pay a special attention to the links between entrepreneurship and economic development process. In that sense, in recent decades, entrepreneurship has been new phenomena in regional science and economic development theories as well as in various different policy documents. The mainstream of the entrepreneurship literature point out that entrepreneurship play a key role in the generation of new jobs, creation of employment, innovations, and dissemination of new knowledge that ultimately lead to economic development and growth.
The main objective of this thesis is to investigate the relationship between entrepreneurship and regional economic development and growth in the context of NUTS II regions of Turkey for the periods of 1990, 2000, and 2011. Based on this objective and the recent regional economic development models, the study firstly examines the contribution of entrepreneurship on regional economic development and growth. Secondly, the thesis investigates the reasons behind the diverse impacts of entrepreneurship on regional economic development. In that sense, the study examines the relationship between the level of regional entrepreneurial activity, represented as firm birth rates and self-employment rate, and the stages of regional economic development. Lastly, the thesis investigates the effects of the certain regional characteristics on regional entrepreneurial activity. For the empirical analysis, two analyses are used: multiple regression analysis and one-way ANOVA.
The results of the study on the contribution of entrepreneurship on economic development and growth indicate that firm births and self-employment are positively related to the economic development and growth of NUTS II regions of Turkey. However, it is observed that firm birth rate has more pronounced impact on economic development and growth than self-employment rate. In addition, firm death is found to negatively associate with economic development and growth. Furthermore, the empirical findings on the relationship between the level of entrepreneurship and the stages of economic development demonstrate that there is a U-shaped relationship between firm birth rate and regional economic development level. However, the findings also show that there is an inverse U-shaped relationship between self-employment rate and the level of regional economic development. The thesis also contributes to the knowledge about the impacts of regional economic, demographic, institutional, and cultural factors on the regional entrepreneurial activity. The results support the arguments that regional characteristics have substantial effects on regional entrepreneurial activity.
Entrepreneurship can be a means for wealth accumulation and upward mobility. However, would people with prospects of upward mobility (POUM) be more likely to engage in entrepreneurship in order to achieve upward mobility? Using data from the Chinese General Social Survey (CGSS), we show for the first time that people with higher POUM will be more likely to engage in entrepreneurship. The effect of POUM on entrepreneurship is stronger for individuals with lower financial constraints. Moreover, higher POUM can enhance an individual’s risk-taking attitude and degree of social capital, thereby motivating entrepreneurship. Overall, this article highlights the crucial noneconomic role social mobility expectations play in driving individuals towards entrepreneurship.
This study explores which local factors affect the creation of sustainable or green startups in a geographical area. The analysis aims to help regional legislators get a more nuanced view of regional economic and sustainable policymaking and to promote a transition toward a greener economy. Building on knowledge spillover theory, results from 4301 companies across Europe show that the driving factors for the emergence of green startups go beyond funding opportunities. Knowledge exchange and industry networks are equally if not more important in attracting green entrepreneurs. Results also reveal that green startups are more likely than non-green startups to change their location. Of those who change their location, green founders prefer large cities and have a negative inclination to establish their companies in small cities. Companies in the sustainable information technology (IT) industry are less likely to change their location, whereas green manufacturing companies are more likely to change. In summation, results indicate that the location choices and resulting evolution of clusters for green startups are based on a number of variables, including local knowledge stock and spillovers, company density, availability of educated talent, and industry affiliations.
The formation of new firms is an important determinant of regional economic development and agglomeration is a key factor affecting the formation and scale of operations of new firms. The present paper is among the first to explore the relationship between agglomeration economies (using localization and urbanization economies) and new firms' formation and scale of operations in a developing country. We make use of rich firm‐level data and find that agglomeration has a significant impact on the formation of new firms and their scale of operation in Punjab, Pakistan. Our findings also reveal that localization at all scales (small, medium and large) has a positive correlation with the arrival of new firms, while medium‐scale and large‐scale localization is positively correlated with the scale of operation of new firms.
An active debate has centered on the importance of manufacturing for driving innovation in the U.S. economy. This paper offers an alternative framework that focuses on the role of suppliers of goods and services (the “supply chain economy”) in national performance. We identify three conceptual attributes of suppliers that make them important for innovation: they produce specialized inputs; have more downstream linkages with other industries; and benefit especially from co-locating with their customers, creating externalities. Using the 2002 Benchmark Input-Output Accounts, we estimate a new industry categorization that separates supply chain (SC) industries (i.e., those that sell primarily to businesses or government) from business-to-consumer (B2C) industries (i.e., those that sell primarily to consumers). We find that the supply chain economy is a distinct and large segment of the economy that includes primarily service providers. The SC industries, especially traded services, have higher average wages than B2C industries. The supply chain economy also has higher innovative activity as captured by the concentration of the vast majority of STEM jobs (primarily in traded services) and patents (in manufacturing). Finally, we find that employment in the economy has evolved from manufacturing into two distinct types of services (1998–2015): SC Traded Services (with the highest STEM intensity and wages) versus B2C Main Street (with the lowest STEM intensity and wages).
Economists, beginning with Alfred Marshall, have studied the significance of cities in the production and exploitation of information externalities that, today, we call knowledge spillovers. This paper presents robust evidence of those effects. We show that patent intensity - the per capita invention rate - is positively related to the density of employment in the highly urbanized portion of MAs. All else equal, a city with twice the employment density (jobs per square mile) of another city will exhibit a patent intensity (patents per capita) that is 20 percent higher. Patent intensity is maximized at an employment density of about 2,200 jobs per square mile. A city with a more competitive market structure or one that is not too large (a population less than 1 million) will also have a higher patent intensity. These findings confirm the widely held view that the nation's densest locations play an important role in creating the flow of ideas that generate innovation and growth.
This study considers how a firm's resource base affects the choice of industries into which the firm diversifies. It offers two main extensions of prior research. First, it operationalizes technological resources at a more detailed level than in prior studies, thereby enabling a more stringent analysis of the direction of diversification. This analysis shows that the predictive power of the "resource-based view of the firm" is greatly improved when resources are measured at a finer level. Second, the study integrates principles from transaction cost economics into resource-based predictions concerning diversification. In particular, it tests the common assumption that rent-generating resources are too asset specific to allow contracting. The findings point to circumstances where resources can be and are exploited through contracting rather than through diversification.
While the potential importance of cultural factors for entrepreneurship has been stressed by several researchers, empirical research focusing on this issue is scarce. In this study, values and beliefs assumed to be related to entrepreneurial behaviour, as well as entrepreneurial intentions, are investigated amongst the general population in six structurally different clusters of regions within Sweden. The cultural differences found are not very large, but interesting and statistically significant differences exist. The results suggest that the prevalence of certain values affect levels of entrepreneurship measured as regional rates of new firm formation. There is no clear indication that beliefs about the societal and individual outcomes of entrepreneurship influence new firm formation. The results further suggest some intricate relationships between structure, culture and entrepreneurship. These have implications for policy-making as well as research.
It is often asserted that a highly educated workforce is vital to improving the competitive position of American businesses, especially by boosting entrepreneurship. To examine this contention, we use population Census data and a rich, new, nationally representative panel of startup firms, to examine how the education and skill level of the local labor force are related to the creation and success of new businesses. We find that areas that possess more skilled labor also possess higher rates of self-employment and more skilled entrepreneurs. As in previous studies, we find that education of the business owner is strongly linked to improved business outcomes. Potentially consistent with the popular view, we also find that, conditional on owner's education, higher education levels in the local market are positively correlated with improved business outcomes.
Several scholars have documented the positive consequences of job-hopping by inventors, including knowledge,spillovers and agglomerationand the concentration of spinoffs. This work investigates a possible antecedentof inventor mobility: regional variation in the enforcement,of post-
This paper considers the relationship between local industrial organization and agglomeration economies.
This paper evaluates the role of regional cluster composition in the economic performance of regional industries, clusters and regions. Except in narrow circumstances, the traditional distinction between industry specialization and regional diversity is misplaced, failing to capture the linkages among related industries or the importance of spillovers from proximate regions. Building on Porter's (1990, 2001) concept of clusters, we offer a systematic evaluation of the relationship between regional cluster composition and the employment and patent growth of regional economic areas, clusters and industries. Our approach allows us to separately disentangle the impact of convergence from agglomeration. The cluster framework suggests three key spillovers influencing economic performance: within cluster, across linked clusters, and across common clusters in neighboring regions. Using newly available data from the US Cluster Mapping Project, the empirical analysis exploits a rich panel dataset at the industry-cluster-region level between 1990 and 2003. We specify growth models that simultaneously accommodate convergence and agglomeration effects. The convergence effects will dominate at the narrowest level (e.g., industry level), and the agglomeration forces are tested above that level of analysis (e.g., clusters and related clusters). To address the potential endogeneity between regional cluster composition and subsequent economic performance, we include detailed controls for the attributes of industries, clusters, regions and neighboring regions. We document several robust findings. First, for narrow units of analysis, we observe convergence (e.g., industry-region growth is declining in the initial level of industry-region development). After controlling for this convergence effect, we document several specific implications of cluster-driven agglomeration: (a) industries participating in a strong cluster are associated with higher employment and patenting growth, (b) industry and cluster level growth increase with the presence of linked clusters in the region, and (c) industry and cluster level growth increase with the presence of strong similar clusters in adjacent regions. Finally, relative strength in a region's leading clusters (i.e., those highly over-represented in the region) contribute to the employment and patenting growth of other traded and local clusters within that region. Overall, these findings suggest the presence of cluster-driven agglomeration effects and highlight the role of regional clusters in economic performance.
Biotechnology, rather than defined as a distinct industry like automobiles or steel, is instead a scientific knowledge base --a rapidly evolving technology --that has economically valuable applications in such diverse industries as pharmaceuticals, medical diagnostics, agriculture, bio-environmental remediation and chemical processing. Biotechnology has captured the imagination of ambitious scientific investigators, investors seeking high rates of return, as well as economic development officials who hope to anchor the industry within their district and reap the economic and employment rewards. Biotech is still at an early stage and there are many competing hypotheses about its future development. This paper adapts the concept of the anchor tenant from real estate economics to explore the locational concentration and specialization of the emerging biotech industry. Established Anchor firms who use a new technology may create knowledge externalities that benefit smaller dedicated biotech firms and increase overall innovative output in the region. In the situation of a shopping mall, the market failure is addressed through rents. In the absence of such a transfer mechanism among firms, we may except that smaller firms would benefit from a location premium and this would result in a greater number of new start-ups and better performance.
This paper makes use of American patent data to shed light on the geographical history of invention, and introduces a methodology (the Wellesley Technology Concordance) which creates matrices describing the distribution of patents by 43 industries of manufacture and 50 sectors of use, along with all intersectoral interactions. National data (1840-1996) are presented and summarized, along with state-level totals (1883-1996). A simple constant market share analysis demonstrates the usefulness of the WTC methodology in the exploration of regional differences over time, illuminating the links between the continued success of key sectors and the emergence or submergence of geographic regions as leading inventors.
The spillovers in knowledge among largely college-educated workers were among the key reasons for the impressive degree of economic growth and spread of entrepreneurship in the United States during the 1990s. Prior ‘industrial policies’ in the 1970s and 1980s did not advance growth because these were based on outmoded large manufacturing models. Zoltan Acs and Catherine Armington use a knowledge spillover theory of entrepreneurship to explain new firm formation rates in regional economies during the 1990s period and beyond. The fastest-growing regions are those that have the highest rates of new firm formation, and which are not dominated by large businesses. The authors of this 2006 text also find support for the thesis that knowledge spillovers move across industries and are not confined within a single industry. As a result, they suggest, regional policies to encourage and sustain growth should focus on entrepreneurship among other factors.
Economists, beginning with Alfred Marshall, have studied the significance of cities in the production and exploitation of information externalities that, today, we call knowledge spillovers. This paper presents robust evidence of those effects. We show that patent intensity—the per capita invention rate—is positively related to the density of employment in the highly urbanized portion of MAs. All else equal, a city with twice the employment density (jobs per square mile) of another city will exhibit a patent intensity (patents per capita) that is 20 percent higher. Patent intensity is maximized at an employment density of about 2200 jobs per square mile. A city with a more competitive market structure or one that is not too large (a population less than 1 million) will also have a higher patent intensity. These findings confirm the widely held view that the nation's densest locations play an important role in creating the flow of ideas that generate innovation and growth.
Previous research has indicated that investment in R&D by private firms and universities can lead to knowledge spillover, which can lead to exploitation from other third-party firms. If the ability of these third-party firms to acquire knowledge spillovers is influenced by their proximity to the knowledge source, then geographic clustering should be observable, especially in industries where access to knowledge spillovers is vital. The spatial distribution of innovation activity and the geographic concentration of production are examined, using three sources of economic knowledge: industry R&D, skilled labor, and the size of the pool of basic science for a specific industry. Results show that the propensity for innovative activity to cluster spatially is more attributable to the influence of knowledge spillovers and not merely the geographic concentration of production. (SFL)
Empirical studies based on individual data have found an inverse U-shaped relationship between age and the decision to start a business. Other studies have shown that becoming an entrepreneur is a regional event, with potential entrepreneurs benefiting from their local networks. This article links both strands of literature by introducing age-specific peer effects. Using changes in the age distribution of the population of western German regions over time, we found-in accordance with microlevel analyses-an inverse U-shaped relationship between the regional age structure and start-up activity in a region. Moreover, our findings suggest that the age-specific likelihood of becoming an entrepreneur changes with the size of the age cohort, pointing to the existence of age-specific peer effects. Copyright (c) 2009 Clark University.
Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
Abstract European,nations empirically,substitute between,employment,protection regulations and labor market,expenditures,like unemployment,insurance,bene…ts in the provision of labor market insurance to workers. While perhaps substitutes from a worker’s perspective, employment,regulations more,directly tax …rms making,frequent labor force adjustments. These labor adjustments,are especially important,for the portfolio companies,of both ven- ture capital and buy-out investors. European,nations providing worker,insurance through labor market,expenditures,developed,stronger domestic,private equity markets,over the 1990-2004 period than those nations favoring employment,protection. These patterns are further evident in US-sourced private equity investments into Europe. Moreover, tests for industry specialization suggest that countries with more,‡exible labor markets,tend to specialize in sectors characterized,by high labor volatility. These results are relevant to the literatures examining,the impact,of labor market,regulations on entrepreneurship,and productivity,growth,due to reallocations across …rms and sectors. JEL Classi…cation: J11, J21, J31, J61, M13. Key Words: employment protection regulations, dismissal costs, unemployment insur-
We argue that social capital places strong constraints on an entrepreneur's ability to found a firm in a region in which he or she does not have connections. We examine this thesis using comprehensive data on the Danish population and find evidence broadly consistent with this claim. Entrepreneurs tend to open businesses in regions in which they have deep roots ('home' regions). We further find that their ventures perform better (survive longer) when they locate in these home regions. The value of social capital moreover appears substantial, similar in magnitude to the value of having prior experience in the industry entered (i.e. human capital).
abstractEmpirical studies based on individual data have found an inverse U-shaped relationship between age and the decision to start a business. Other studies have shown that becoming an entrepreneur is a regional event, with potential entrepreneurs benefiting from their local networks. This article links both strands of literature by introducing age-specific peer effects. Using changes in the age distribution of the population of western German regions over time, we found—in accordance with microlevel analyses—an inverse U-shaped relationship between the regional age structure and start-up activity in a region. Moreover, our findings suggest that the age-specific likelihood of becoming an entrepreneur changes with the size of the age cohort, pointing to the existence of age-specific peer effects.
Entrepreneurial activity varies substantially across regions and sectors and appears to be related to the stigma of failure. To understand this phenomenon, I present a multiple-equilibrium model based on endogenous stigma of failure. Using private information, entrepreneurs choose whether to continue a project or to abandon it and raise funds to undertake a new project. Project outcomes depend on luck and ability, and the cost of capital for failed entrepreneurs is determined by the market's expectations about their ability. In the conserva- tive equilibrium failed entrepreneurs face a high cost of capital and thus good entrepreneurs are reluctant to terminate a project. The resulting low quality of the pool of failed entrepreneurs justies in turn the high cost of capital. The reverse is true in the experimental equilibrium where good entrepreneurs are more willing to start again and the cost of capital for failed entrepreneurs is low. The experimental equilibrium is not always ecient: The conservative equilibrium dominates in low-risk and capital intensive sectors. I study in this context the eciency of institutions such as bankruptcy rules and fresh start policy. I show that policies aimed at increasing the survival of start-ups can have important counterproductive eects.
Whether diversity or specialization of economic activity better promotes technological change and subsequent economic growth has been the subject of a heated debate in the economics literature. The purpose of this paper is to consider the effect of the composition of economic activity on innovation. We test whether the specialization of economic activity within a narrow concentrated set of economic activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation. The evidence provides considerable support for the diversity thesis but little support for the specialization thesis.
Using the matched employer–employee data set for Denmark and information on the founders of new firms, we analyze the hiring
choices of all new firms that entered from 2003 to 2010. We develop a theoretical model in which the quality of a firm’s employees
determines its average cost, a firm’s productivity is based on its pre-entry experience and persistent shocks, and over time
firms learn about their productivity. The model predicts that more productive firms are larger and hire more talented employees,
which gives rise to various predictions about how pre-entry experience, firm growth rates, and firm size influence the wages
firms pay to their early hires. We find that beginning with the time of entry, larger firms consistently pay higher wages
to their new hires. These are firms with greater survival prospects at the time of entry based on the pre-entry backgrounds
of their founders and that grow at greater rates over time, both of which are predictive of the wages paid to new hires from
the time of entry onward. Our findings suggest workers are allocated to firms according to their abilities, which can give
rise to enduring firm capabilities.
This study explores the importance of tacit knowledge transfer for international tech- nology diusion by examining ethnic scienti…c communities in the US and their ties to their home countries. US ethnic research communities are quanti…ed by applying an ethnic-name database to individual patent records. International patent citations con…rm knowledge diuses through ethnic networks, and manufacturing output in foreign countries increases with an elasticity of approximately 0.3 to stronger scienti…c integration with the US frontier. To address reverse-causality concerns, reduced-form speci…cations exploit exogenous changes in US immigration quotas. Consistent with a model of sector real- location, output growth in less developed economies is facilitated by employment gains, while more advanced economies experience sharper increases in labor productivity. The …ndings suggest tacit knowledge channels partly shape the eective technology frontiers of developing economies.
Compares the organization of regional economies, focusing on Silicon Valley's thriving regional network-based system and Route 128's declining independent firm-based system. The history of California's Silicon Valley and Massachusetts' Route 128 as centers of innovation in the electronics indistry is traced since the 1970s to show how their network organization contributed to their ability to adapt to international competition. Both regions faced crises in the 1980s, when the minicomputers produced in Route 128 were replaced by personal computers, and Japanese competitors took over Silicon Valley's market for semiconductor memory. However, while corporations in the Route 128 region operated by internalization, using policies of secrecy and company loyalty to guard innovation, Silicon Valley fully utilized horizontal communication and open labor markets in addition to policies of fierce competition among firms. As a result, and despite mounting competition, Silicon Valley generated triple the number of new jobs between 1975 and 1990, and the market value of its firms increased $25 billion from 1986 to 1990 while Route 128 firms increased only $1 billion for the same time period. From analysis of these regions, it is clear that innovation should be a collective process, most successful when institutional and social boundaries dividing firms are broken down. A thriving regional economy depends not just on the initiative of individual entrepreneurs, but on an embedded network of social, technical, and commercial relationships between firms and external organizations. With increasingly fragmented markets, regional interdependencies rely on consistently renewed formal and informal relationships, as well as public funding for education, research, and training. Local industrial systems built on regional networks tend to be more flexible and technologically dynamic than do hierarchical, independent firm-based systems in which innovation is isolated within the boundaries of corporations. (CJC)
Like all politics, all entrepreneurship is local. Individuals launch firms and, if successful, expand their enterprises to other locations. But new firms must start somewhere, even if their businesses are conducted largely or exclusively on the Internet. Likewise, policymakers at local and state levels increasingly recognize that entrepreneurship is the key to building and sustaining their economies' growth. Although this is a seemingly obvious proposition, it represents something of a departure from past thinking about how local, state, or regional economies grow. Historically, state and local policymakers have put their energies into trying to attract existing firms from somewhere else, either to relocate to a particular area or to build new facilities there. Such smokestack chasing - or, in this cleaner era, simply firm chasing - often has degenerated into what is essentially a zero-sum game for the national economy. When one city or state offers tax breaks or other financial inducements to encourage firms to locate new plants or headquarters, and succeeds, some other city or state loses out in the process. Local, state, and regional economic development centered on entrepreneurship, however, is a fundamentally different phenomenon. The formation and growth of new firms, especially those built around new products or ways of doing things, wherever this occurs, is clearly a positive sum game, not just for the locality, but for the nation as a whole. This essay provides a guide to policymakers and citizens to what is known about the effects of various local and state policies aimed at fostering entrepreneurially driven growth. There is also much we do not know; thus, the essay identifies subjects that require further research.
This purpose of this research was to assess the contribution of skilled immigrants in the creation of engineering and technology businesses and intellectual property in the United States. We found there was at least one immigrant key founder in 25.3% of all engineering and technology companies established in the U.S. between 1995 and 2005 inclusive. We estimate that together, this pool of immigrant-founded companies was responsible for generating more than $52 billion in 2005 sales and creating just under 450,000 jobs as of 2005. This research shows that immigrants have become a significant driving force in the creation of new businesses and intellectual property in the U.S. and that their contributions have increased over the past decade.
Cities and regions have long captured the imagination of sociologists, economists, and urbanists. From Alfred Marshall to Robert Park and Jane Jacobs, cities have been seen as cauldrons of diversity and difference and as fonts for creativity and innovation. Yet until recently, social scientists concerned with regional growth and development have focused mainly on the role of firms in cities, and particularly on how these firms make location decisions and to what extent they concentrate together in agglomerations or clusters. This short article summarizes recent advances in our thinking about cities and communities, and does so particularly in light of themes advanced in my recently published book, The Rise of the Creative Class, which focuses on diversity and creativity as basic drivers of innovation and regional and national growth. This line of work further suggests the need for some conceptual refocusing and broadening to account for the location decisions of people as opposed to those of firms as sources of regional and national economic growth. In doing so, this article hopes to spur wider commentary and debate on the critical functions of cities and regions in 21st–century creative capitalism.
This study considers how a firm's resource base affects the choice of industries into which the firm diversifies. It offers two main extensions of prior research. First, it operationalizes technological resources at a more detailed level than in prior studies, thereby enabling a more stringent analysis of the direction of diversification. This analysis shows that the predictive power of the "resource-based view of the firm" is greatly improved when resources are measured at a finer level. Second, the study integrates principles from transaction cost economics into resource-based predictions concerning diversification. In particular, it tests the common assumption that rent-generating resources are too asset specific to allow contracting. The findings point to circumstances where resources can be and are exploited through contracting rather than through diversification.
Why do firms cluster near one another? We test Marshall's theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for US manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where collocation drives input-output linkages or hiring patterns, we use data from UK industries and from US areas where the two industries are not collocated. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important. (JEL L14, L60, O33, R23, R32)
This paper presents a model of urban capital markets in which credit is allocated among risky investment projects in cities of various sizes. Because capital assets are specialized and immobile, the default value of a project depends on the second best use of its assets, and this is expected to be more valuable in large cities. Thus, city size provides external collateral, a public input in urban capital markets. This suggests that one source of agglomeration economies is the relative stability of large urban areas. It also implies that large areas will undertake a more extensive range of projects.
We trace the geographic and intellectual heritage of the early entrants into the US tire industry in Ohio, the industry’s historical center. We test a model in which the supply of capable entrants, localized knowledge, and production externalities influence where entrants originated and located. Entry clustered around existing tire producers and in more populated regions, which we attribute mainly to the supply of capable entrants. Production externalities influenced the profitability of operating in a region, but their effect was limited by the localized knowledge of entrants. Entry fueled agglomeration mainly through an endogenous process governing the supply of capable entrants.
When firms cluster in the same local labour market, they face a trade-off between the benefits of labour pooling (i.e., access to workers whose knowledge help reduce costs) and the costs of labour poaching (i.e., loss of some key workers to competition and a higher wage bill to retain the others). We explore this tradeoff in a duopoly game. Depending on market size, on the degree of horizontal differentiation between goods, and on worker heterogeneity in terms of knowledge transfer cost, we characterise the strategic choices of firms regarding locations, wages, poaching and prices. Our results show that co-location, although it is always efficient in our framework, is not in general the non-cooperative equilibrium outcome.
We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are non-negligible. Nonetheless, certain goods are sometimes produced by multiple firms, all of which are located in the same region. These goods are then exported from the regions in which their production is agglomerated. Regional agglomeration of production and trade stem from two forces. First, competition between firms for the services of trained workers makes it easier for workers to recoup the cost of acquiring industry-specific human capital. Second, the technology of production is more efficient when plants are larger than a minimum efficient scale and local demand is insufficient to support several firms of that scale. We also study the policy implications of our model.
An investor's home bias in industrial location decisions may stem from personal factors, social capital, other non-transferable assets, and imperfect information about the urban and regional environment. This paper explores the distinction between home-base and non-home location decisions in Portugal. We reach two important conclusions. First, the introduction of a variable accounting for prior base of economic activity significantly improves the statistical results. Second, we find that the weighting of distinct location attributes differs between home and non-home locations. Notably, non-home location choices are strongly governed by agglomeration economies and proximity to major urban centers, possibly replicating prior location decisions to economize on search costs. The results also enable us to quantify the investor's willingness to opt for a possible home-field advantage; for example, entrepreneurs accept over three times higher labor costs to compete in their resident area of business.
This paper makes two contributions to the empirical literature on agglomeration economies. First, the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities. Previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale. Second, the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by Saxenian (1994). This is a potentially important source of increasing returns that previous empirical work has not considered. Results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration.
nullI confirm the finding that the propensity to start a new firm rises sharply among those in the top five percentiles of personal wealth. This pattern is more pronounced for entrants in less capital intensive sectors. Prior to entry, founders in this group earn about 6% less compared to those who stay in paid employment. Their firms are more likely to fail early and conditional on survival, less likely to be make money. This pattern is only true for the most-wealthy individuals, and is attenuated for wealthy individuals starting firms in capital intensive industries. Taken together, these findings suggest that the spike in entry at the top end of the wealth distribution is driven by low-ability individuals who can afford to start (and sometimes continue running) weaker firms because they do not face the discipline of external finance.
We examine entrepreneurship and creative destruction following US banking deregulations using US Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. Most of the closures, however, were the new ventures themselves. Although we find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many business failures along with the few great successes. The successes are difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.
The report argues that aid volatility is an important source of volatility for the poorest countries. Following a method already applied by the Agence Française de Développement, the report argues that loans to LICs should incorporate a floating grace period, which the country could draw upon when hit by a shock. The definition of a shock should include aid uncertainty, along with others such as commodity shocks and natural disasters. The idea is calibrated to a key IMF policy instrument towards Low-Income Countries, the Poverty-Reducing and Growth Facility (PRGF).
Le rapport montre que l’aide aux pays pauvres contribue à accroître la volatilité de ces pays. Suivant une méthode déjà élaborée par l’Agence Française de Développement, l’article propose d’accorder des crédits aux pays pauvres, qui incorporent un droit de grâce flexible, utilisable par le pays, lorsqu’il est confronté à un choc négatif, quelle qu’en soit la cause : choc d’aide, de prix des matières premières ou catastrophe naturelle. Il montre comment l’instrument utilisé par le FMI à destination des pays pauvres, le PRGF, pourrait être modifié pour ce faire.