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 389: Spin-offs: Why geography matters

Apostolos Baltzopoulos (), Pontus Braunerhjelm () and Ioannis Tikoudis ()
Additional contact information
Apostolos Baltzopoulos: Department of Industrial Economics and Management, KTH Royal Institute of Technology and The Swedish Competition Authority, Stockholm, Sweden.
Pontus Braunerhjelm: Department of Industrial Economics and Management, KTH Royal Institute of Technology, Centre of Excellence for Science and Innovation Studies (CESIS), 100 44 Stockholm, Sweden.
Ioannis Tikoudis: Department of Spatial Economics, VU University Amsterdam, De Boelelaan 1105, 1081HV, and Tinbergen Institute, Gustav Mahlerplein 117, 1082MS Amsterdam.

Abstract: Based on unique data covering individuals, firms, industries, and regions for the 1999-2005 period, we contribute with new knowledge concerning the impact of regional variables on spin-offs. Implementing a large number of controls, as well as different estimation techniques and robustness tests, we show that Jacobian externalities have a positive effect on spin-offs. Moreover, using an entropy measure to disentangle unrelated and related variety, we conclude that the effect is confined to related variety. These findings are likely to be associated with strong welfare effects: a standard-deviation increase (decrease) in related (unrelated) variety increases spin-off propensity by approximately 25%. Other variables are shown to have economic effects of a similar magnitude but may have a different effect across sectors. Sensitivity analyses indicate that the impact of other determinants proposed in the literature (e.g., Marshallian externalities and scale effects) is too small to be detected.

Keywords: Regions; spin-offs; industries

JEL-codes: D01; L26; R10

41 pages, December 22, 2014

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