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Survival of Entrepreneurial Firms: The Role of Agglomeration Externalities

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  • Tavassoli, Sam

    (CIRCLE, Lund University)

  • Jienwatcharamongkhol, Viroj

    (Department of Economics, Lund University)

Abstract

This paper analyzes the role of various types of agglomeration externalities on the survival rate of entrepreneurial firms. In particular, we trace the population cohort of newly-established and self-employed Swedish firms in the Knowledge-Intensive Business Service (KIBS) sector in 1997 up to 2012 and investigate the role of Marshallian and Jacobian externalities on the survival of these firms. We find that only Jacobian externalities (diversity) is positively associated with the survival of entrepreneurial firms. Not all Jacobian externalities matter though. Only the higher the “related variety” of the region in which an entrepreneurial firm is founded, the higher will be the survival chance of the firm, while “unrelated variety” barely has any significant correlation. The result is robust after controlling for extensive firm characteristics and individual characteristics of the founders. The main message here is: for a newly-established entrepreneurial firm, not only it matters who you are, but also where you are.

Suggested Citation

  • Tavassoli, Sam & Jienwatcharamongkhol, Viroj, 2016. "Survival of Entrepreneurial Firms: The Role of Agglomeration Externalities," Papers in Innovation Studies 2016/28, Lund University, CIRCLE - Centre for Innovation Research.
    • Handle: RePEc:hhs:lucirc:2016_028
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    6. Sam Tavassoli & Viroj Jienwatcharamongkhol & Pia Arenius, 2023. "Colocation of Entrepreneurs and New Firm Survival: Role of New Firm Founder’s Experiential Relatedness to Local Entrepreneurs," Entrepreneurship Theory and Practice, , vol. 47(4), pages 1421-1459, July.
    7. Tavassoli, Sam & Jienwatcharamongkhol, Viroj & Arenius, Pia, 2021. "Colocation of Entrepreneurs and New Firm Survival: Role of New Firm Founder’s Experiential Relatedness to Local Entrepreneurs," Papers in Innovation Studies 2021/13, Lund University, CIRCLE - Centre for Innovation Research.
    8. KATO-VIDAL Enrique L., 2022. "Industrial Variety, Firms And Resilience," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 17(2), pages 141-159, August.
    9. Dongjun Kim & Jinsung Yun & Kijung Kim & Seungil Lee, 2021. "A Comparative Study of the Robustness and Resilience of Retail Areas in Seoul, Korea before and after the COVID-19 Outbreak, Using Big Data," Sustainability, MDPI, vol. 13(6), pages 1-21, March.
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    12. Wei, Wei & Zhang, Wan-Li & Wen, Jun & Wang, Jun-Sheng, 2020. "TFP growth in Chinese cities: The role of factor-intensity and industrial agglomeration," Economic Modelling, Elsevier, vol. 91(C), pages 534-549.
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    14. Tavassoli, Sam & Obschonka, Martin & Audretsch, David B., 2021. "Entrepreneurship in Cities," Research Policy, Elsevier, vol. 50(7).
    15. Del Sarto, Nicola & Isabelle, Diane A. & Di Minin, Alberto, 2020. "The role of accelerators in firm survival: An fsQCA analysis of Italian startups," Technovation, Elsevier, vol. 90.
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    More about this item

    Keywords

    Entrepreneurial firms; region; agglomeration externalities; survival analysis; related variety; unrelated variety;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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