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

Abstract: Impactful, growth-oriented entrepreneurship is a major research and policy focus. Building on arguments put forward by Jane Jacobs more than 50 years ago, we propose that local knowledge spillovers in a city are enhanced by human agency in that city (e.g. local psychological openness). This effect is critically amplified by the catalyst function of a favorable structural city environment that not only connects these agentic people (via urban density), but also facilitates the production and flow of new knowledge for these connected agentic people (via a diverse industry mix). This three-way interaction effect was confirmed in our empirical investigation of quality entrepreneurship across the MSAs (cities) in the US, using a large-scale dataset of the psychological profiles of millions of people. Local openness shows a robust positive effect on the level of quality entrepreneurship. This effect is further strengthened by a favorable structural city environment (i.e. high density and diversity) by up to 35%. Reviving Jacobs’ people focus, the results indicate that the best performing cities in terms of knowledge spillovers and economic performance are those that are not only home to, and attract, agentic people, but also empower these people by means of a physical and industrial city landscape that enables them to act in more innovative and entrepreneurial ways, as envisioned by Jacobs. We discuss the policy implications of our findings and an agenda for future research.

Keywords: Entrepreneurship; Cities; Jacobs externalities; Knowledge Spillovers; Diversity; Density; Personality traits; Openness; Geographical psychology

JEL-codes: D83; D91; L26; O18

47 pages, March 30, 2021

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