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Clusters of Entrepreneurship

In: Cities and Entrepreneurship

  • Edward L. Glaeser
  • William R. Kerr
  • Giacomo A. M. Ponzetto

Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.

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This chapter was published in:
  • Edward L. Glaeser & Stuart S. Rosenthal & William C. Strange, 2010. "Cities and Entrepreneurship," NBER Books, National Bureau of Economic Research, Inc, number glae09-1, May.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11896.
    Handle: RePEc:nbr:nberch:11896
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