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Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?

  • Edward L. Glaeser

    ()

    (Harvard University, John F. Kennedy School of Government; Faculty of Arts and Sciences)

  • William R. Kerr

    ()

    (Harvard Business School, Entrepreneurial Management Unit)

Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.

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Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 09-055.

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Length: 52 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:hbs:wpaper:09-055
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