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Determinants of Entry and Exit: The Significance of Demand and Supply Conditions at the Regional Level

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Drivers of Innovation, Entrepreneurship and Regional Dynamics

Part of the book series: Advances in Spatial Science ((ADVSPATIAL))

Abstract

Today there is an extensive research literature on entrepreneurship and firm demography. However, even if many studies have identified substantial and persistent variations in entrepreneurship rates across regions in a variety of countries (Georgellis and Wall 2000), most attempts trying to explain entrepreneurship variations have been restricted to industry determinants (Arauzo-Carod and Manjón-Antolín 2007). As a matter of fact, location factors are neglected in most studies trying to explain variations in entrepreneurship.“Entrepreneurial management, or the study of the creation and growth of new companies, has become a prominent field in the literature on management. This field has developed largely independently of location considerations”. Porter (2000, 269). This is astonishing, since there are studies, which show that location factors matter. See, e.g., Reynolds et al. (1993), Audretsch and Fritsch (1994), Garofoli (1994), Guesnier (1994), Malecki (1993), Saxenian (1999), Fotopoulos and Spence (1999, 2001), Berglund and Brännäs (2001), Armington and Acs (2002), Arauzo and Teruel (2005), and Karlsson and Backman (2008).

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Notes

  1. 1.

    “Entrepreneurial management, or the study of the creation and growth of new companies, has become a prominent field in the literature on management. This field has developed largely independently of location considerations”. Porter (2000, 269).

  2. 2.

    See, e.g., Reynolds et al. (1993), Audretsch and Fritsch (1994), Garofoli (1994), Guesnier (1994), Malecki (1993), Saxenian (1999), Fotopoulos and Spence (1999, 2001), Berglund and Brännäs (2001), Armington and Acs (2002), Arauzo and Teruel (2005), and Karlsson and Backman (2008).

  3. 3.

    “It is surprising to observe that the geography of entrepreneurship has indeed received far less attention [than other aspects of entrepreneurship]”. Nijkamp (2003).

  4. 4.

    Already Chinitz (1961) argued that the existence of many small firms and a culture of entrepreneurship could explain why New York was much more successful than Pittsburgh.

  5. 5.

    A similar classification of agglomeration economies has been provided by Hoover (1948).

  6. 6.

    We thus have a spatial version of the so-called “knowledge spillover theory of entrepreneurship” (Audretsch and Lehman 2005).

  7. 7.

    Florida (2002) has suggested that creative capital rather than human capital is the source of entrepreneurship and economic growth in regions.

  8. 8.

    It may be observed that while in some respects spatial transaction costs have fallen over time, there are other aspects in which spatial transaction costs appear to have actually increased over time (McCann and Sheppard 2003).

  9. 9.

    This does not exclude the possibility that some smaller functional regions may offer favourable seed-bed conditions for entrepreneurship within, for example, specialized industrial clusters.

  10. 10.

    The concept potential entrepreneurs is used here to stress that when well-educated people move into larger regions from smaller ones the major attractor is probably the dynamic labour market in larger functional regions. However, as soon as the in-migrants are established in the larger region, they become potential entrepreneurs that sometimes are better at discovering business opportunities than people who have lived in the larger region for a long time. It seems, on the other hand, to be well-established in the literature that entrepreneurs rarely move when they establish new (Stam 2007) and, in particular new high-tech firms (Cooper and Folta 2000). However, they may have migrated to the region well before they become entrepreneurs.

  11. 11.

    See, e.g., McCann (1995), Guimarães et al. (2000), Fujita and Thisse (2002), Rosenthal and Strange (2003), McCann and Sheppard (2003), Holl (2004), and Viladecans (2004).

  12. 12.

    Naturally, the survival or success rates of new entrepreneurs show large variations between sectors and regions (Acs 2000).

  13. 13.

    The international market is of course also an alternative but an alternative that we disregard here.

  14. 14.

    See Plümper and Troeger (2007) for further details.

  15. 15.

    We add one to all observations to avoid any zeros in entries and exits in any municipality. This “transformation” will only have a very slight influence on our econometric results.

  16. 16.

    See tables of correlation matrix in the appendix for further details/characteristics of the variables.

  17. 17.

    The four sectors used in this paper are: the primary sector, the manufacturing sector, the ordinary service sector and the advanced service sector.

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Authors and Affiliations

  1. Jönköping International Business School, Jönköping University, 1026, SE-551 11, Jönköping, Sweden

    Jenny Grek, Charlie Karlsson & Johan Klaesson

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  1. Jenny Grek
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  2. Charlie Karlsson
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  3. Johan Klaesson
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Correspondence to Jenny Grek .

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Editors and Affiliations

  1. , Department of Spatial Economics, VU University Amsterdam, De Boelelaan 1105, Amsterdam, 1081 HV, Noord-Holland, Netherlands

    Karima Kourtit

  2. , Department of Spatial Economics, VU University Amsterdam, De Boelelaan 1105, Amsterdam, 1081 HV, Noord-Holland, Netherlands

    Peter Nijkamp

  3. School of Public Policy, George Mason University, University Drive 4400, Fairfax, 22030, Virgin Islands, USA

    Roger R. Stough

Appendix

Appendix

Table A.1 Correlation matrix for the primary sector
Full size table
Table A.2 Correlation matrix for the manufacturing sector
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Table A.3 Correlation matrix for the ordinary service sector
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Table A.4 Correlation matrix for the advanced service sector
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Grek, J., Karlsson, C., Klaesson, J. (2011). Determinants of Entry and Exit: The Significance of Demand and Supply Conditions at the Regional Level. In: Kourtit, K., Nijkamp, P., Stough, R. (eds) Drivers of Innovation, Entrepreneurship and Regional Dynamics. Advances in Spatial Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17940-2_7

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