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Creative Destruction and Productivity – Entrepreneurship by type, sector and sequence

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Author Info

  • Andersson, Martin

    (Centre of Excellence for Science and Innovation Studies (CESIS) at JIBS and The Royal Institute of Technology (KTH). He is also affiliated to Blekinge Institute of Technology (BTH))

  • Braunerhjelm, Pontus

    ()
    (Swedish Entrepreneurship Forum)

  • Thulin, Per

    ()
    (Swedish Entrepreneurship Forum)

Abstract

Schumpeter claimed the entrepreneur to be instrumental for creative destruction and industrial dynamics. Entrepreneurial entry serves to transform and revitalize industries, thereby enhancing their competitiveness. This paper investigates if entry of new firms influences productivity amongst incumbent firms, and the extent to which altered productivity can be attributed sector and time specific effects. Implementing a unique dataset we estimate a firm-level production function in which the productivity of incumbent firms is modeled as a function of firm attributes and regional entrepreneurship activity. The analysis finds support for positive productivity effects of entrepreneurship on incumbent firms, albeit the effect varies over time, what we refer to as a delayed entry effect. An immediate negative influence on productivity is followed by a positive effect several years after the initial entry. Moreover, the productivity of incumbent firms in services sectors appears to be more responsive to regional entrepreneurship, as compared to the productivity of manufacturing firms. The unique data implemented (population) allows us to identify genuinely new ventures as compared to those associated with reorganizations of existing businesses, thereby overcoming much of data deficiencies in previous studies. In addition, data are distributed on Swedish functional labor market regions.

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Bibliographic Info

Paper provided by Swedish Entrepreneurship Forum in its series Working Papers with number 2011:8.

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Length: 29 pages
Date of creation: 01 Apr 2011
Date of revision:
Handle: RePEc:hhs:entfor:2011_008

Contact details of provider:
Postal: Swedish Entrepreneurship Forum, Örebro University, SE-70182 ÖREBRO, Sweden
Web page: http://www.oru.se/Institutioner/Handelshogskolan-vid-Orebro-universitet/

Related research

Keywords: entrepreneurship; entry; business turbulence; incumbent firms; productivity; region; business dynamics;

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References

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  1. Ciccone, Antonio & Papaioannou, Elias, 2007. "Red tape and delayed entry," Working Paper Series 0758, European Central Bank.
  2. Hyunbae Chun & Jung-Wook Kim & Randall Morck & Bernard Yeung, 2007. "Creative Destruction and Firm-Specific Performance Heterogeneity," NBER Working Papers 13011, National Bureau of Economic Research, Inc.
  3. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2004. "Entry and Productivity Growth: Evidence from Microlevel Panel Data," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 265-276, 04/05.
  4. Michael Fritsch & Pamela Mueller, 2005. "The Persistence of Regional New Business Formation-Activity over Time - Assessing the Potential of Policy Promotion Programs," Papers on Entrepreneurship, Growth and Public Policy 2005-02, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
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  15. Fritsch, Michael & Brixy, Udo & Falck, Oliver, 2004. "The effect of industry, region and time on new business survival: A multi-dimensional analysis," Freiberg Working Papers 2004,04, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  16. Acs, Zoltán J & Audretsch, David B & Braunerhjelm, Pontus & Carlsson, Bo, 2004. "The Missing Link: The Knowledge Filter and Entrepreneurship in Endogenous Growth," CEPR Discussion Papers 4783, C.E.P.R. Discussion Papers.
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  20. Grek, Jenny & Karlsson, Charlie & Klaesson, Johan, 2009. "Market Potential and New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 202, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
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Citations

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Cited by:
  1. Eliasson, Gunnar & Braunerhjelm, Pontus, 2012. "Entrerpreneurial Catch Up And New Industrial Competence Bloc Formation In The Baltic Sea Region," Working Paper Series in Economics and Institutions of Innovation 279, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  2. Michael Fritsch, 2012. "Methods of analyzing the relationship between new business formation and regional development," Jena Economic Research Papers 2012-064, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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