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Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries

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  • Niels Bosma
  • Erik Stam
  • Veronique Schutjens

Abstract

Do processes of firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, measured by Total Factor Productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities.

Suggested Citation

  • Niels Bosma & Erik Stam & Veronique Schutjens, 2008. "Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries," Papers in Evolutionary Economic Geography (PEEG) 0813, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2008.
    • Handle: RePEc:egu:wpaper:0813
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    References listed on IDEAS

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    1. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    2. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    3. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
    4. Marcus Dejardin, 2011. "Linking net entry to regional economic growth," Small Business Economics, Springer, vol. 36(4), pages 443-460, May.
    5. Eric J. Bartelsman, 2004. "Firm Dynamics and Innovation in the Netherlands A comment on Baumol," De Economist, Springer, vol. 152(3), pages 353-363, September.
    6. Philippe Aghion & Evguenia Bessonova, 2006. "On Entry and Growth: Theory and Evidence," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 259-278.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    entrepreneurship; entry & exit; turbulence; creative destruction; regional competitiveness; total factor productivity;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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