Community and Capital in Entrepreneurship and Economic Growth

54 Pages Posted: 14 Feb 2015 Last revised: 22 Jan 2017

See all articles by Sampsa Samila

Sampsa Samila

University of Navarra, IESE Business School

Olav Sorenson

Yale School of Management

Date Written: November 28, 2016

Abstract

We argue that social integration -- in the sense of within-community interconnectedness -- and venture capital have a complementary relationship in fostering innovation, entrepreneurship, and economic growth. Using panel data on metropolitan areas in the United States, from 1993 to 2002, our analyses reveal that racial integration -- in the microgeography of residential patterns -- moderates the effect of venture capital, with more ethnically-integrated places benefiting more from the availability of venture capital. Our results remained robust to estimation with instrumental variables to address potential endogeneity in the supply of venture capital and in the level of social integration. We also provide evidence for the underlying mechanisms by demonstrating that communities with higher levels of racial integration foster the discovery of more novel and more valuable inventions and the emergence of more ethnically-diverse entrepreneurial groups.

Keywords: Segregation, social capital, venture capital, innovation, entrepreneurship, economic growth, microgeography

JEL Classification: G24, L26, R11

Suggested Citation

Samila, Sampsa and Sorenson, Olav, Community and Capital in Entrepreneurship and Economic Growth (November 28, 2016). Available at SSRN: https://ssrn.com/abstract=2564516 or http://dx.doi.org/10.2139/ssrn.2564516

Sampsa Samila (Contact Author)

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Olav Sorenson

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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