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How do entrepreneurs in clusters contribute to economic growth?

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Author Info

  • Wennberg, Karl

    ()
    (Dept. of Business Administration, Stockholm School of Economics)

  • Lindqvist, Göran

    ()
    (Dept. of Business Administration, Stockholm School of Economics)

Abstract

This paper investigates the long-term survival and performance of new entrepreneurial firms, comparing firms located within regional clusters with those located outside of clusters.We use matched employee-employer databases to investigate all Swedish firms started in the telecom and consumer electronic s, financial services, information technology, medical equipment, and pharmaceuticals and biotech sectors (N = 4,397). We follow these firms from 1993 to 2002 and measure their contribution to local economic vitality in term of job creation, payment of taxes, and payment of salaries to employees. Controlling for factors such as firm size, age, and absorptive innovative capabilities, we find strong empirical evidence that being located within a cluster has positive effects on the survival of new firms. We also find that clustered firm creates more jobs, higher tax payments, and higher wages to employees. The effects are consistent across alternative measures of agglomeration and different regional levels. Thid study contributes to the literatures on entrepreneurship and economic geography. By measuring the economic contributions of clustered and non-clustered firms, the empirical evidence also provides support for basing economic policies on clusters.

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File URL: http://swoba.hhs.se/hastba/papers/hastba2008_003.pdf
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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Business Administration with number 2008:3.

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Length: 21 pages
Date of creation: 07 Jun 2007
Date of revision:
Publication status: Published in Small Business Economics, 2010, pages 221-241.
Handle: RePEc:hhb:hastba:2008_003

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, SE 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Keywords: Clusters; Entrepreneurship; Economic Development;

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References

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  1. Börje Johansson & John Quigley, 2003. "Agglomeration and networks in spatial economies," Papers in Regional Science, Springer, vol. 83(1), pages 165-176, October.
  2. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
  3. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  4. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
  5. Charlie Karlsson, 1997. "Product development, innovation networks, infrastructure and agglomeration economies," The Annals of Regional Science, Springer, vol. 31(3), pages 235-258.
  6. Guy Dumais & Glenn Ellison & Edward Glaeser, 1997. "Geographic Concentration as a Dynamic Process," NBER Working Papers 6270, National Bureau of Economic Research, Inc.
  7. Folta, Timothy B. & Cooper, Arnold C. & Baik, Yoon-suk, 2006. "Geographic cluster size and firm performance," Journal of Business Venturing, Elsevier, vol. 21(2), pages 217-242, March.
  8. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Karlsson, Charlie & Johansson, Börje, 2006. "Regional Development and Knowledge," Working Paper Series in Economics and Institutions of Innovation 76, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  10. David B. Audretsch, 1995. "Innovation and Industry Evolution," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011468, December.
  11. Fotopoulos, Georgios & Louri, Helen, 2000. " Location and Survival of New Entry," Small Business Economics, Springer, vol. 14(4), pages 311-21, June.
  12. Hector Rocha, 2004. "Entrepreneurship and Development: The Role of Clusters," Small Business Economics, Springer, vol. 23(5), pages 363-400, October.
  13. Baptista, Rui & Swann, Peter, 1998. "Do firms in clusters innovate more?," Research Policy, Elsevier, vol. 27(5), pages 525-540, September.
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Cited by:
  1. Boari, Cristina & Fioretti, Guido & Odorici, Vincenza, 2008. "Rivalry and Learning Among Clustered and Isolated Firms," MPRA Paper 13066, University Library of Munich, Germany.

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