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Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?

Edward L. Glaeser
Harvard University - John F. Kennedy School of Government, Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

William R. Kerr
Harvard University - Entrepreneurial Management Unit

October 7, 2008

Harvard Business School Entrepreneurial Management Working Paper No. 09-055
US Census Bureau Center for Economic Studies Paper No. CES-WP- 08-37
Harvard Institute of Economic Research Discussion Paper No. 2165

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 sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.

Keywords: Entrepreneurship, Industrial Organization, Agglomeration, Labor Markets, Input-Output Flows, Innovation, Research and Development, Patents

JEL Classifications: J2, L0, L1, L2, L6, O3, R2

Working Paper Series

Date posted: October 07, 2008 ; Last revised: June 02, 2009

Suggested Citation

Glaeser, Edward L. and Kerr, William R., Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain? (October 7, 2008). Harvard Business School Entrepreneurial Management Working Paper No. 09-055; US Census Bureau Center for Economic Studies Paper No. CES-WP- 08-37; Harvard Institute of Economic Research Discussion Paper No. 2165. Available at SSRN: http://ssrn.com/abstract=1280283

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Contact Information

William R. Kerr (Contact Author) Harvard University - Entrepreneurial Management Unit ( email ) Soldiers Field Road Morgan 270C Boston, MA 02163 United States
Edward L. Glaeser Harvard University - John F. Kennedy School of Government, Department of Economics ( email ) Littauer Center Room 315A Cambridge, MA 02138 United States 617-496-2150 (Phone) 617-496-1722 (Fax)
Brookings Institution 1775 Massachusetts Ave. NW Washington, DC 20036-2188 United States
National Bureau of Economic Research (NBER) 1050 Massachusetts Avenue Cambridge, MA 02138 United States