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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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    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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