Clusters and Entrepreneurship

32 Pages Posted: 9 Oct 2010 Last revised: 8 Jan 2015

Mercedes Delgado

Independent

Michael E. Porter

Harvard University - Strategy Unit

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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Date Written: September 1, 2010

Abstract

This paper examines the role of regional clusters in regional entrepreneurship. We focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized. The empirical analysis uses a novel panel dataset from the Longitudinal Business Database of the Census Bureau and the U.S. Cluster Mapping Project (Porter, 2003). Using this dataset, there is significant evidence of the positive impact of clusters on entrepreneurship. After controlling for convergence in start-up activity at the region-industry level, industries located in regions with strong clusters (i.e. a large presence of other related industries) experience higher growth in new business formation and start-up employment. Strong clusters are also associated with the formation of new establishments of existing firms, thus influencing the location decision of multiestablishment firms. Finally, strong clusters contribute to start-up firm survival.

Keywords: Entrepreneurship, Industry Clusters, Dynamic Economies of Agglomeration

Suggested Citation

Delgado, Mercedes and Porter, Michael E. and Stern, Scott, Clusters and Entrepreneurship (September 1, 2010). US Census Bureau Center for Economic Studies Paper No. CES-WP-10-31. Available at SSRN: https://ssrn.com/abstract=1689084 or http://dx.doi.org/10.2139/ssrn.1689084

Mercedes Delgado (Contact Author)

Independent

No Address Available

Michael E. Porter

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
(617) 495-6309 (Phone)
(617) 547-8543 (Fax)

Scott Stern

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States
617-253-3053 (Phone)
617-253-2660 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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