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

52 Pages Posted: 20 Oct 2008 Last revised: 29 Oct 2014

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

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Date Written: October 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

Suggested Citation

Glaeser, Edward L. and Kerr, William R., Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain? (October 2008). NBER Working Paper No. w14407. Available at SSRN: https://ssrn.com/abstract=1286411

Edward L. Glaeser (Contact Author)

Harvard University - Department of Economics ( email )

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William R. Kerr

Harvard University - Entrepreneurial Management Unit ( email )

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