Search results

The purpose of this paper is to give a nuanced picture of how the local bank sector influences new firm formation and how this differs along the urban-rural hierarchy. Thus, the present paper increases the knowledge concerning the importance of the local bank sector in influencing new firm formation. In this respect, it also sheds light on how banks influence regional growth through their impact on start-ups.

The empirical design is based on a cross-sectional approach from 2010, where Swedish municipalities are employed as the unit of observation. To overcome a possible endogeneity problem, an instrumental variable approach is applied. A two-stage least squares approach is employed in which instruments for the local bank sector in 2010 are utilised.

The findings present positive relationships among the average size of the bank branches, independent banks per capita, bank branches per capita, bank competition, and the number of local start-ups in Sweden. Hence, access to financial funds is important for new firm formation. When the sample is divided across the urban-rural hierarchy, differences arise concerning the importance of the local bank sector. Independent banks per capita and bank branches per capita tend to have a larger impact on firm formation in rural municipalities.

This paper is novel in its detailed approach to describing the local bank sector. This topic is important for local and national policy makers, demonstrating the importance of the local bank sector for a growing and healthy regional economy. This study is also the first study on this topic in Sweden.

While it has been speculated for some time that technology market development at the bottom of the pyramid (BOP) will create millions of new entrepreneurs in developing countries, as the BOP is the largest untapped market, to date, there is hardly any macro‐level cross‐country study investigating the extent to which such market development at the BOP influences new business formation “rates” in developing countries. The purpose of this paper is to examine the role of technology market development at the BOP in the information and communications technology (ICT) sector in influencing new business formation rates in developing countries.

The study draws on cross‐country data from developing countries from World Resources Institute and the World Bank. Several steps were taken to ensure robustness.

First, a connection is established between a developing country's level BOP market for ICT and the county's “rate” of new business formation. Second, it is suggested that the level of industry specialization in a developing country enhances the relationship between BOP markets for ICT and new business formation in a developing country. Third, the empirical analysis is based upon a rigorously‐collected authoritative multi‐country data from World Bank that answers the concern voiced by researchers. Fourth, the results suggest that the established link between ICT and economic growth in developing countries may be occurring through “new business formation” acting as a mediator between the two.

Implications are drawn for policy and further research.

The study establishes a macro‐level connection between a developing country's level of BOP market for ICT and its “rate” of new business formation.

We outline an economic theory of choice of organizational form, concentrating on explaining the selection of contractual relations within employee-owned firms. We then test the theory on a new database of U.S. producer cooperatives and find that the theory is largely supported by the data. Our principal conclusion is that producer cooperative formations have been rather strongly responsive to variations in economic conditions. While procyclical theories are clearly rejected, countercyclical theories receive considerable support. Neither political motivations nor legal institutions, especially the existence of cooperative incorporation laws, appear to have accounted for a portion of cooperative formations on a systematic basis. Support organizations have significant positive impacts on the formation rate of new cooperatives.

We advance entrepreneurship research by developing a theoretical model of how founding teams form. Our neo-Carnegie model situates nascent founders in particular network-structural milieus, engaging in aspiration-driven search for and evaluation of prospective co-founders. The formation of co-founding ties between nascent founders can be divided into four theoretical steps, which we label activation, evaluation, approach, and reciprocation. Successful founding team formation is a consequence of mutually favorable evaluations by nascent founders in a multi-sided matching process. Nascent founders with higher and less flexible aspirations are more likely to undertake distant search for co-founders by seeking referrals, forming ties with strangers, and forming new ties to social foci where they might meet potential co-founders. Churn in newly formed founding teams emerges as a consequence of shifting dominant coalition dynamics in the founding team caused by organic venture evolution and intentional changes in strategic direction. Our theoretical model provides new insights on the formation pathways of founding teams, their initial task and relational resource endowments, and initial team dynamics.

The purpose of this paper is to analyze the relationship between housing markets and new firm formation in six different industries in all 284 municipalities in Sweden.

The authors have used data from Statistics Sweden and The Swedish Agency for Economic and Regional Growth to develop a model to analyze the relationship between house prices and industry-specific new firm formation, with the interaction effect of financial infrastructure.

In the data, stable high house prices have no effect on entrepreneurship. However, a market with rising house prices has a positive effect on new firm formation, in retail, construction, business-to-business services and miscellaneous sectors, but produced no effect in either mining, agriculture and fishing or in manufacturing. The interaction between rising house prices and financial infrastructure does not change the positive effect on retail, business-to-business services and miscellaneous sectors, but within the construction industry, the positive effect on new firm formation disappears. In manufacturing, the authors observe the opposite – a positive effect, instead of no effect previously.

The contribution of this study is to provide evidence of how house prices are associated with entrepreneurship in different industries, as well as analyzing how the interaction between house prices and financial infrastructure is associated with entrepreneurship. By separating observations in time, endogeneity is controlled and a causal relationship where higher house prices is postulated, which leads to an increase in entrepreneurial activity in different industries. By using a spatial Durbin model, the authors control for spatial dependency.

The purpose of this paper is to look at various dimensions of entrepreneurship and the empirical models that try to explain the relationship between entrepreneurship and growth in cities for both developed (USA and Europe) and developing countries.

This paper provides an in‐depth and extensive review of the existing literature on entrepreneurship and economic growth in cities. In most empirical studies, the growth rate of employment or unemployment rate is used as the dependent variable to analyze the effect of entrepreneurship on development. The important independent variables other than entrepreneurship (new start‐ups) are localization, urbanization, level of education, age, industry structure (specialization vs competition), monopoly or competition. The economic units considered for cities are labor market areas (LMAs), standard metropolitan areas (SMAs) and consolidated metropolitan statistical areas (CMSAs). The majority of studies have utilized discrete dependent variable models such as Tobit or Probit to calculate the probability of the effect of entrepreneurship on economic growth. Other studies have applied ordinary least squares estimation to find the cross‐sectional variation of employment growth that accounts for entrepreneurial activities. Panel data are employed in a number of models to control for region‐specific and country‐specific fixed effects.

In this paper, four important dimensions of entrepreneurship are identified. First, for entrepreneurial studies on economic growth, cities are considered to be appropriate economic units rather than states or countries. Second, there are several definitions and measurements of entrepreneurship available in the literature. Hence, empirical models and their results may vary depending on the model specification. Third, the relationship between employment growth (a proxy for economic growth) and innovative activity is dynamic in nature and thus the problem of endogeneity needs to be addressed. And, finally, entrepreneurship has a spatial dimension and that characteristic must be incorporated into the urban and regional models of entrepreneurship. Three different types of urban models are chosen to reflect these four central dimensions of entrepreneurship. All three urban models confirm the hypothesis that there exists a statistically significant and positive relationship between entrepreneurship and growth in cities. However, the causality of the relationship is not well established.

A critical and in‐depth summary of existing quantitative work on entrepreneurship and economic growth in different cities is the original contribution of the paper.

This chapter utilizes German tax data to present evidence about the direct and indirect effects of new firm formation. Cohort analysis is applied to investigate survival, sales, inputs, and value added of start-up firms. Most dropouts occur in the early years. We show that start-up microenterprises increase economic vitality directly. Sales and value added are in an approximate proportion of 3:1. With respect to the indirect effects of new firms, we find that one Euro of sales induces considerable indirect effects because 66 Cents are used to buy products and services from incumbents. For this reason, new firms substantially promote economic prosperity of incumbents. Sectoral differences are also indicated, with the manufacturing industry generating highest sales and relying most heavily on inputs in the early periods.

There has been little research on the processes of providing support to new firm entrepreneurs, and little evaluation of the provision of support to existing small firm entrepreneurs through advice, counselling or consultancy. Despite this lack of research, support for new firm entrepreneurs has been largely withdrawn in England and Wales with the focus of support, through Personal Business Advisers (PBAs), targeted at existing small firm entrepreneurs who employ more than 20 people and have the potential for growth. There are theoretical arguments that suggest support for new start entrepreneurs should be provided on a mentoring basis. If this is provided selectively, then this should have an impact on the management ability and confidence of such new firm starts. This paper reports the results of interviews with new firm entrepreneurs engaged in such a mentoring relationship. The research, undertaken in Scotland, suggests that such a relationship is beneficial. Given the high failure rates of new firm formation, such support could have wider application and benefits. It is suggested that, for certain regions, provision of new firm support can yield positive and worthwhile returns to public sector investment, particularly in a region such as the West of Scotland, characterised by a need to diversify its economy and raise the formation rate of new start small firms and entrepreneurs.

This paper aims to investigate the impact of knowledge spillover effects (KSE) on employment levels using a sample of 245 Italian Innovative startup companies created as a result of the legislative changes of Law Decree 179/12 introduced in Italy in 2012.

This study uses a parsimonious model with the employment level as the dependent variable. The paper tests for the impact that the measures of industry competition, specialization and diversity have on the level of employment in the Innovative Startup sector in Italy. The data uses a sample of 245 firms, across 20 geographic regions in Italy for three economic sectors at the 2-Dig NAICS classification.

The empirical results provide evidence in favor of regional specialization as the main force to create and transfer knowledge resulting in increased employment; while higher levels of competition and a more diverse regional production bases result in lower firm employment levels. Employment levels for these firms are also time-dependent, and thus mainly determined at the time of the firm’s creation. This study also found a lack of technological convergence across regions, that are inherent regional differences are not bridged by knowledge spillover effects.

This paper is based on a sample of Italian Innovative Startups and consequently, further research with a potentially larger sample and, perhaps, a sample across countries could also shed some light on the issues relating to KSE and their effects on employment generation and firm formation.

From a practical point of view, the results indicate that regional disparity and limited transmission of KSE across regions remain an impediment to the flow of knowledge. This in turn may limit the development of entrepreneurial activities and further development of new firms. Practical implications regarding knowledge management indicate that firms face time and spatial challenges when developing, transferring and acquiring knowledge. In sum, the evidence points out in favor of existent and persistent regional heterogeneity in terms of economic and technological specialization as sources of employment.

This research adds to the empirical evidence focusing on the effects of knowledge spillover effects in the Innovative Startup segment of the economy. This research highlights the applicability of knowledge spillover effects accounting for levels of industry competition, specialization and diversity. We also provide a measure of cluster formation and concentration at the sectoral and regional levels. Thus, the research provides a better understanding under which conditions knowledge is more likely to have positive or negative effects on employment generation.