Entrepreneurial Growth and Labour Market Dynamics: Spatial Factors in the Consideration of Relevant Skills and Firm Growth in the Creative, Knowledge-Based Industries
University of Essex CER Working Paper No. 1
22 Pages Posted: 13 Jan 2012
Date Written: August 23, 2011
Studies into the spatial determinants of entrepreneurship have tended to focus on (a) the characteristics of more successful regions, knowledge spillovers and agglomerations of economic activity (Jaffe, 1993, 1998, Zucker, et al, 1998, Acs, 2002, Sorensen and Stuart, 2003, Audretsch and Feldman, 2004; regional differences in entrepreneurship capital (Sternburg & Wennekers 2005), (c) the relationship between personal entrepreneurial characteristics and behavior and new business creation. An apparent propensity for researchers to focus on the performance outcomes of entrepreneurship at a regional level, rather than the structural supply-side conditions that may influence regional differences in rates of new venture formation, and therefore be construed as constituent components of an ‘entrepreneurial culture’ in those areas.
This paper is concerned with the exploration of some of the critical, spatial and structural factors underpinning industry growth, entrepreneurship and labour market dynamics with particular reference to the so-called ‘Creative Industries.’ Our research shows a statistically significant spatial correlation between levels of human capital (amongst other framework factors) and higher rates of new firm formation in knowledge-intensive sectors in the United Kingdom. It then goes on to investigate how human capital (measured in terms of educational attainment at different levels) can be enhanced within an economically peripheral sub-region to overcome mismatches between the supply of, and demand for, what the government terms ‘economically valuable’ skills (Leitch Review of Skills in the UK, 2004). Not all such enhancement measures generate entrepreneurial outcomes in terms of self-employment and new business creation. Equally, the availability of flexible labour and skills can support the growth of innovative firms. It is precisely these dynamics within local production systems, coupled with the existence of an entrepreneurial capability, that force many workers to change from the status of self-employed to that of employees at various times in their lives (Cappellin, 1998). Thus, the issue of labour market skills and flexibility is of particular relevance in this paper.
In recent years there has been a growing interest from academia and policy makers in the idea of the ‘cultural industries’ initially, and more recently in the ‘creative industries’ and the notion of the ‘creative economy.’ It is the specific and special construct of the ‘creative industries’ (as distinct from all other industries) that has received overwhelming attention from the media, policy makers and researchers. Florida (2002, 2005) makes a compelling argument that creative talent is the key driver of growing knowledge-based economies. Creative industry products and services incorporate individual skill and creativity that are knowledge-intensive and locally derived. This paper seeks to address these issues with a particular focus on the determinants of new firm formation and the factors that can help determine regional advantage for new business creation and innovation in the creative industries. Specifically, we attempt to explore and identify key determinants of business formation in Knowledge Intensive sectors (which include the creative industries) of regions outside the major metropolitan conurbations, and their possible differences with other Non- Intensive Sectors.
Based on analysis of Local Authority Districts of Thames Gateway South Essex (TGSE) in East of England, we find that while human capital is positively correlated with new business entry in Knowledge intensive sectors, it is negatively correlated with new startups in non-knowledge intensive sectors. This finding suggests that while entrepreneurship in knowledge based and creative industries requires highly skilled labour, in nonknowledge based industries, low skilled labour is the primary determinant of new firm creation. Our findings also appear to suggest the need for higher skills/educated base in order to boost the growth of new businesses in the TGSE region. Finally, we develop a new creativity index for secondary regions that measures more directly the concentration of creative and knowledge based industries.
Keywords: Creative Industries, knowledge-based, core-periphery, talent, skills, regions
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