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

52 Pages Posted: 7 Oct 2008

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

William R. Kerr

Harvard University - Entrepreneurial Management Unit

Multiple version iconThere are 3 versions of this paper

Date Written: October 7, 2008

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 Classification: J2, L0, L1, L2, L6, O3, R2

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: https://ssrn.com/abstract=1280283 or http://dx.doi.org/10.2139/ssrn.1280283

Edward L. Glaeser

Harvard University - Department of Economics ( email )

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Brookings Institution

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National Bureau of Economic Research (NBER)

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William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

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