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

  • 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)

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.

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Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 337.

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Length: 32 pages
Date of creation: 09 Dec 2013
Date of revision:
Handle: RePEc:hhs:cesisp:0337
Contact details of provider: Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
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