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 177: Sources of Persistence in Regional Start-Up Rates - evidence from Sweden

Martin Andersson () and Sierdjan Koster ()
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
Sierdjan Koster: Urban and Regional Studies Institute, Faculty of Spatial Science, University of Groningen

Abstract: The relationship between start-up rates and regional economic development has been studied rather extensively in recent years. Dynamics in start-up rates have however received considerably less attention. In this paper we analyze the persistence of start-up rates across Swedish regions over a decade and analyze the sources of persistence. We find overall persistence in start-up rates. Start-up rates of a decade earlier are able to explain over 40 % of the variation in current start-up rates across regions. The paper introduces and tests two mechanisms that can account for persistence in start-up rates across regions: (i) path-dependence in start-up activity, such that there is a response mechanism between previous and current start-up activity and (ii) spatially ‘sticky’ and durable determinants of start-ups. A dynamic panel analysis applying the system GMM estimator of lagged start-up rates on current start-up rates, confirms that persistence in start-up activity can be explained by both effects. Using transition probability analysis and quantile regression techniques, we also show that there is a regional dimension in persistence.

Keywords: entrepreneurship; start-ups; persistence; path-dependence; start-up dynamics; geography of entrepreneurship

JEL-codes: L26; O18; R11; R12

27 pages, April 18, 2009

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