Creative destruction and productivity: entrepreneurship by type, sector and sequence

Martin Andersson (Circle, Lund University, Lund, Sweden and School of Management, Blekinge Institute of Technology (BTH), Karlskrona, Sweden)
Pontus Braunerhjelm (Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm, Sweden and Swedish Entrepreneurship Forum, Sweden)
Per Thulin (Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm, Sweden and Swedish Entrepreneurship Forum, Sweden)

Journal of Entrepreneurship and Public Policy

ISSN: 2045-2101

Publication date: 5 October 2012

Abstract

Purpose

Schumpeter claimed the entrepreneur to be instrumental for creative destruction and industrial dynamics. Entrepreneurial entry serves to transform and revitalize industries, thereby enhancing their competitiveness. The purpose of this paper is to investigate if entry of new firms influences productivity amongst incumbent firms, and the extent to which altered productivity can be attributed sector and time specific effects.

Design/methodology/approach

Implementing a unique dataset the paper estimates a firm‐level production function in which the productivity of incumbent firms is modeled as a function of firm attributes and regional entrepreneurship activity.

Findings

The analysis finds support for positive productivity effects of entrepreneurship on incumbent firms, albeit the effect varies over time, what the authors refer to as a “delayed entry effect”. An immediate negative influence on productivity is followed by a positive effect several years after the initial entry. Moreover, the productivity of incumbent firms in services sectors appears to be more responsive to regional entrepreneurship, as compared to the productivity of manufacturing firms.

Originality/value

The paper employs a firm‐level production function approach allowing for time lags of the effect of entrepreneurship. The unique data implemented allow the authors to identify genuinely new ventures as compared to those associated with reorganizations of existing businesses, thereby overcoming much of data deficiencies in previous studies. In addition, data are distributed on Swedish functional labor market regions.

Keywords

Citation

Andersson, M., Braunerhjelm, P. and Thulin, P. (2012), "Creative destruction and productivity: entrepreneurship by type, sector and sequence", Journal of Entrepreneurship and Public Policy, Vol. 1 No. 2, pp. 125-146. https://doi.org/10.1108/20452101211261417

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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