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 167: New Firm Formation and Economic Development in a Globalizing Economy

Sierdjan Koster () and Charlie Karlsson ()
Additional contact information
Sierdjan Koster: Urban and Regional Studies Institute, Groningen University
Charlie Karlsson: 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

Abstract: This paper provides an overview of how globalization can impact on new firm formation and its consequence on regional economic development. Although there is a large body of research on new firm formation, the economic context in which new firm formation takes place has received considerably less attention. Globalization, changes conditions for new firm formation and it may change the role of new firm formation in economic development. The main conclusion of this review is that there is very little concrete understanding about if and how globalization actually impacts on new firm formation. Thus, the conclusion of this paper is probably best read as suggestions for research that addresses the issue of new firm formation in a globalizing economy. We distinguish two main avenues for research. The first avenue is on the firm level and is concerned with the issue to what extent new firms are actually influenced by globalization. The second avenue is on the regional level and addresses the question if and how globalization will impact on the regional distribution of new firm formation. Although globalization may open up the world market for many regions, it is uncertain whether this will lead to a reshuffle of economic development, for example governed by developments in new firm formation. Competition is fierce and it is a question of which regions are ready to take the opportunities that globalization offers.

Keywords: New Firm Formation; Economic Development; Regional Development; Globalizing; Economy; Innovation; Productivity; Growth; Employment Growth

JEL-codes: L10; M13; O10; R11

21 pages, January 28, 2009

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