Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 156: Emergence of Firms: A Sociogeographic Demand Side Perspective

Karin Hellerstedt () and Karl Wennberg ()
Additional contact information
Karin Hellerstedt: Jönköping International Business School, Postal: Jönköping International Business School, PO Box 1026, SE-551 11 Jönköping, Sweden
Karl Wennberg: The Ratio Institute and Stockholm School of Economics, Postal: The Ratio Institute, P.O. Box 3203, SE-103 64 Stockholm, Sweden

Abstract: This paper presents an analysis of regional start-up rates in the knowledge intensive services and high-tech industries. To supplement prevailing frameworks focusing mainly on supply-side economic factors, we integrate insights from economic geography and population ecology to the entrepreneurship literature as to present a theoretical framework that captures both supply-and demand-side factors, with a specific emphasis on the demand side. Using a rich multi-level data material on all knowledge intensive start-ups across the 286 Swedish municipalities between 1994 and 2002, the empirical analysis focuses on how characteristics of the economic milieu of regions influence firm births. We find that economically affluent regions dominate entrepreneurial activity in terms of firm births, yet a number of much smaller rural region revealed high levels of start ups. Both economic and sociological variables such as knowledge spillovers from universities and firm R&D, and the political regulatory regime within the municipality, exhibit strong influences on firm births. These patterns points to strong support for the notion that ‘the geographic connection’ is important for analyzing entrepreneurial processes.

Keywords: Firm birth; Geography; Entrepreneurship

JEL-codes: M13; R11; R23

36 pages, September 14, 2010

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