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Entrepreneurs and cities: Complexity, thickness and balance

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  • Helsley, Robert W.
  • Strange, William C.

Abstract

It is well established that the thickness of local markets can enhance entrepreneurial activity (Vernon (1960)). It has been more recently established that because they carry out so many different tasks, a balance of skills may be beneficial to entrepreneurs (Lazear (2004, 2005)). This paper unifies these approaches to agglomeration and entrepreneurship. The paper's model of multidimensional task completion generates several interesting results. First, agglomeration economies arising from market thickness are reflected in shorter completion times. Second, complex projects that are infeasible in small cities may be feasible in large cities, where adaptation costs and completion times are lower. Third, it may be possible for less balanced entrepreneurs to manage successfully in large cities by substituting local market thickness for a balance of skills. Fourth, the Lazear result on the balance of entrepreneurs is shown to be related to Jacobs' (1969) classic result on urban diversity (city balance). Both are special cases of a more general sort of balance.

Suggested Citation

  • Helsley, Robert W. & Strange, William C., 2011. "Entrepreneurs and cities: Complexity, thickness and balance," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 550-559.
  • Handle: RePEc:eee:regeco:v:41:y:2011:i:6:p:550-559
    DOI: 10.1016/j.regsciurbeco.2011.04.001
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    Cited by:

    1. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, Elsevier.
    2. Tsvetkova, Alexandra, 2016. "Do diversity, creativity and localized competition promote endogenous firm formation? Evidence from a high-tech US industry," MPRA Paper 72349, University Library of Munich, Germany.
    3. Michael Fritsch & Florian Noseleit, 2013. "Indirect employment effects of new business formation across regions: The role of local market conditions," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 361-382, June.
    4. repec:kap:sbusec:v:49:y:2017:i:1:d:10.1007_s11187-017-9866-6 is not listed on IDEAS
    5. Michael Fritsch & Sandra Kublina, 2015. "Entrepreneurship,Growth, Regional Growth Regimes," Jena Economic Research Papers 2015-002, Friedrich-Schiller-University Jena.
    6. Daniel Lechmann & Claus Schnabel, 2014. "Are the self-employed really jacks-of-all-trades? Testing the assumptions and implications of Lazear’s theory of entrepreneurship with German data," Small Business Economics, Springer, vol. 42(1), pages 59-76, January.
    7. Dohse, Dirk & Vaona, Andrea, 2014. "Start-up complexity and the thickness of regional input markets," Economics Letters, Elsevier, vol. 124(3), pages 424-427.
    8. Elisabeth Bublitz & Michael Fritsch & Michael Wyrwich, 2015. "Balanced Skills and the City: An Analysis of the Relationship between Entrepreneurial Skill Balance, Thickness, and Innovation," Economic Geography, Clark University, vol. 91(4), pages 475-508, October.
    9. Tsvetkova, Alexandra & Partridge, Mark & Betz, Micael, 2016. "Entrepreneurial and Wage and Salary Employment Response to Economic Conditions Across the Rural-Urban Continuum," MPRA Paper 75781, University Library of Munich, Germany.
    10. Javier Changoluisa & Michael Fritsch, 2016. "New Business Formation and Incumbents' Perception of Competitive Pressure," Jena Economic Research Papers 2016-019, Friedrich-Schiller-University Jena.
    11. Glaeser, Edward L. & Rosenthal, Stuart S. & Strange, William C., 2010. "Urban economics and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 67(1), pages 1-14, January.
    12. Hårsman, Björn & Mattsson, Lars-Göran & Hovsepyan, Vardan, 2017. "The income return to entrepreneurship – theoretical model and outcomes for Swedish regions," Working Paper Series in Economics and Institutions of Innovation 463, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    13. Lofstrom, Magnus & Bates, Timothy & Parker, Simon C., 2014. "Why are some people more likely to become small-businesses owners than others: Entrepreneurship entry and industry-specific barriers," Journal of Business Venturing, Elsevier, vol. 29(2), pages 232-251.
    14. Hundt Christian & Sternberg Rolf, 2014. "How Did the Economic Crisis Influence New Firm Creation?: A Multilevel Approach Based Upon Data from German Regions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 234(6), pages 722-756, December.

    More about this item

    Keywords

    Agglomeration; Entrepreneurship; Thick markets; Urban diversity;

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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