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Clusters and Entrepreneurship

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  • Mercedes Delgado
  • Michael Porter
  • Scott Stern
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    Abstract

    This paper examines the role of regional clusters in regional entrepreneurship. We focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized. The empirical analysis uses a novel panel dataset from the Longitudinal Business Database of the Census Bureau and the U.S. Cluster Mapping Project (Porter, 2003). Using this dataset, there is significant evidence of the positive impact of clusters on entrepreneurship. After controlling for convergence in start-up activity at the region-industry level, industries located in regions with strong clusters (i.e. a large presence of other related industries) experience higher growth in new business formation and start-up employment. Strong clusters are also associated with the formation of new establishments of existing firms, thus influencing the location decision of multiestablishment firms. Finally, strong clusters contribute to start-up firm survival.

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    File URL: ftp://ftp2.census.gov/ces/wp/2010/CES-WP-10-31.pdf
    File Function: First version, 2010
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    Bibliographic Info

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-31.

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    Length: 32 pages
    Date of creation: Sep 2010
    Date of revision:
    Handle: RePEc:cen:wpaper:10-31

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    Related research

    Keywords: Entrepreneurship; Industry Clusters; Dynamic Economies of Agglomeration;

    This paper has been announced in the following NEP Reports:

    References

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    1. Dunne, Timothy & Klimek, Shawn D. & Roberts, Mark J., 2005. "Exit from regional manufacturing markets: The role of entrant experience," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 399-421, June.
    2. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
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