Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Centre for Innovation Research

No 2013/30: Local Clusters of Entrepreneurs -neighborhood peer effects in entrepreneurship?

Martin Andersson () and Johan P. Larsson ()
Additional contact information
Martin Andersson: CIRCLE, Lund University, Sweden and Blekinge Institute of Technology, Postal: CIRCLE, Lund University, PO Box 117, SE-22100 Lund, Sweden
Johan P. Larsson: Centre for Entrepreneurship and Spatial Economics (CEnSE), Department of Economics, Finance and Statistics, Jönköping International Business School (JIBS), Jönköping

Abstract: Entrepreneurial activity is significantly predicted by the presence of other entrepreneurs in the residential neighborhood. One plausible source of such spatial clustering is local peer effects, where individuals’ decisions to become entrepreneurs are influenced by entrepreneurial neighbors. Using geo-coded matched employer-employee data for Sweden, we find that sharing residential neighborhood with established entrepreneurs has a statistically significant and robust influence on the probability than an individual leaves employment for entrepreneurship. An otherwise average neighborhood with a 5 percentage point higher entrepreneurial intensity all else equal produces between 7 and 8 more entrepreneurs per square kilometer, each year. Local peer effects appear as important in explaining local clusters of entrepreneurs, and imply a local feedback-effect in which the presence of established entrepreneurs in a neighborhood breeds new local entrepreneurs

Keywords: entrepreneurship; clusters; peer effects; local social interactions; role models; neighborhood; social network externalities; path dependence

JEL-codes: J24; L26; R12; R23

32 pages, November 25, 2013

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201330_Andersson_Larsson.pdf PDF-file

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