Entrepreneurship, firms creation and regional performance

Purpose - The purpose of this paper is to analyse if the divergences in the economic growth of the Spanish regions are a result of sectoral differences, company size or technological level of the new firms that emerge in the market. Design/methodology/approach - For this purpose, a model is specified and estimated in which the total factor productivity of Spanish regions is explained by business dynamics, innovation, human capital and the level of entrepreneurship in each region. Findings - The results obtained lead the authors to conclude that entrepreneurship understood as both the creation of new firms and entrepreneurial activity, have a positive effect on productive efficiency and can explain the differences in the economic growth of the regions. In addition, the stock of human capital and the promotion of innovation act as catalysts for the productive efficiency of the regions. However, the results show that it is not enough to generate new firms to boost economic growth; these businesses must also be oriented towards sectors that promote technological innovation and with the objective to reach an adequate size. Originality/value - Empirical studies use either the creation of new firms or the index of entrepreneurial activity as alternative measures of entrepreneurship. In this research, however, both variables are considered together. Specifically, the creation of new companies is used as a measure of regional business dynamics, and the entrepreneurial activity index, provided by the Global Entrepreneurship Monitor, as a measure of regional entrepreneurship. The main novelty of this paper’s approach is that it considers different types of entrepreneurial capital in considering productive sector, size and technological level of the new companies.