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
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.
Number of Pages in PDF File: 52
Keywords: Entrepreneurship, Industrial Organization, Agglomeration, Labor Markets, Input-Output Flows, Innovation, Research and Development, Patents
JEL Classification: J2, L0, L1, L2, L6, O3, R2working papers series
Date posted: October 7, 2008
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