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The Influence of Diversity on the Formation, Survival and Growth of New Firms

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  • Backman, Mikaela

    (Centre of Excellence for Science and Innovation Studies (CESIS), Jönköping International Business School, Centre for Entrepreneurship and Spatial Economics (CEnSE), & Royal Institute of Technology (KTH))

  • Kohlhase, Janet

    (University of Houston)

Abstract

Our paper investigates how diversity of the labor force influences the rate of new firm formation and the performance of new firms in urban areas. A diversified labor force within the firm and in the external environment influences the formation, survival and growth of firms. We explore these issues with both aggregate data at the municipal level and individual data at the firm level for the years 1993-2010. We measure diversity using entropy measures that account for a wider range of differences than is typically used. Our empirical analysis finds a positive influence of diversity of the labor force on the rate of new firm formation at the municipal level. At the level of an individual firm, we find that the diversity of the firm’s labor force is positively associated with the survival and growth of new firms. Our results add to the literature on the workings of agglomeration economies through variations in human capital, information spillovers and innovation.

Suggested Citation

  • Backman, Mikaela & Kohlhase, Janet, 2013. "The Influence of Diversity on the Formation, Survival and Growth of New Firms," Working Paper Series in Economics and Institutions of Innovation 337, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0337
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    Cited by:

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    2. Genevieve Giuliano & Sanggyun Kang & Quan Yuan, 2019. "Agglomeration economies and evolving urban form," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 377-398, December.

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    More about this item

    Keywords

    Diversity; labor force; education; occupation; industry; new firms; formation; survival; growth;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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