Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 116: Location Attributes and Start-Ups in Knowledge Intensive Business Services

Martin Andersson () and Karin Hellerstedt ()
Additional contact information
Martin Andersson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Karin Hellerstedt: JIBS and Centre for Innovation Systems, Entrepreneurship and Growth (CISEG)

Abstract: We study start-ups in Knowledge Intensive Business Services (KIBS) across regions in Sweden by individuals with a formally recognized capacity to produce and develop advanced business services. The empirical analysis is based on a theoretical framework which emphasizes both supply- and demand-side factors. Supply-side variables pertain to accessibility to knowledge and information upon which a new firm can be established. Demand-side variables refer to market-size and pertain to the ability to recover fixed start-up costs and economize on costs associated with face-to-face interaction. 78 percent of the KIBS founders have prior work experience from business services, suggesting that KIBS start-ups are more frequent in regions where the KIBS sector is already large. Controlling for the stock of potential entrepreneurs and the stock KIBS firms, we show that both supply- and demand-side factors influence KIBS start-up activity. Results are consistent with that KIBS start-ups are stimulated by the simultaneous presence of (i) knowledge resources conducive for the generation and diffusion of knowledge and ideas upon which new firms can be established and (ii) a large market. The findings suggest that the geography of KIBS is shaped in cumulative and self-reinforcing processes, and can explain the tendency of KIBS firms to agglomerate in large city-regions.

Keywords: knowledge intensive business services; knowledge spillovers; start-ups; entrepreneurship; location

JEL-codes: L26; L84; R12

23 pages, February 27, 2008

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