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Entrepreneurship and Regional Economic Growth: Towards A General Theory of Start-Ups

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  • Gries, Thomas
  • Naude, Wim

Abstract

Start-ups of new firms are important for economic growth. However, start-up rates differ significantly between countries and within regions of the same country. A large empirical literature studies the reasons for this and attempts to identify the regional determinants of start-ups. In contrast, there is a much smaller theoretical literature that attempts the formal modelling of the start-up process within a region. In this paper, we attempt to contribute to this small literature by introducing a general theoretical model of the entrepreneurial start-up process. The model links start-ups to economic growth and can be applied to understand growth in a regional context. We derive five propositions that fit the stylized facts from the empirical literature: (i) growth in the regional economy is driven by an expansion in the number of start-up firms that supply intermediate goods and services; (ii) improvements in human capital will enhance the rate of start-ups; (iii) improvements in the relative rates of return to entrepreneurs and business conditions will raise start-up rates; (iv) an increase in regional financial concentration will reduce the start-up rate in a region and; (v) increased agglomeration/urbanization in a region has an a priori ambiguous effect on start-up rates.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-70.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2008/70.

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Length: 26 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:unu:wpaper:rp2008-70

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Keywords: start-ups; entrepreneurship; frictions; economic growth;

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References

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Citations

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Cited by:
  1. Tengeh, Robertson Khan & Ballard, Harry & Slabbert, Andre, 2011. "Financing the Start-up and Operation of Immigrant-owned Businesses: the path taken by African Immigrants in the Cape Town Metropolitan Area of South Africa," MPRA Paper 38405, University Library of Munich, Germany, revised 19 Dec 2011.
  2. Georgios Fotopoulos, 2012. "Nonlinearities in regional economic growth and convergence: the role of entrepreneurship in the European union regions," The Annals of Regional Science, Springer, vol. 48(3), pages 719-741, June.
  3. Tobias Stucki, 2009. "How Long Do External Capital Constraints Matter?," KOF Working papers 09-241, KOF Swiss Economic Institute, ETH Zurich.
  4. Gries, Thomas & Naude, Wim, 2010. "Entrepreneurship, Structural Change and a Global Economic Crisis," Working Paper Series wp2010-57, World Institute for Development Economic Research (UNU-WIDER).
  5. Hans Westlund & Johan P. Larsson & Amy Olsson, 2012. "Startups and Local Social Capital in the Municipalities of Sweden," ERSA conference papers ersa12p91, European Regional Science Association.
  6. Ing. Matthijs H. M. Hammer, 2012. "How Business Management benefit from Entrepreneurship," Proceedings- 10th International Conference on Mangement, Enterprise and Benchmarking (MEB 2012), Óbuda University, Keleti Faculty of Business and Management.
  7. Kent Eliasson & Hans Westlund, 2013. "Attributes influencing self-employment propensity in urban and rural Sweden," The Annals of Regional Science, Springer, vol. 50(2), pages 479-514, April.
  8. Tengeh, Robertson Khan & Ballard, Harry & Slabbert, Andre, 2011. "A framework for acquiring the resources vital for the start-up of a business in South Africa:an African Immigrant’s Perspective," MPRA Paper 34211, University Library of Munich, Germany.

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