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Survival of Entrepreneurial Firms: The Role of Agglomeration Externalities

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  • Tavassoli, Sam

    () (CIRCLE, Lund University)

  • Jienwatcharamongkhol, Viroj

    () (Department of Economics, Lund University)

Abstract

This paper analyzes the role of various types of agglomeration externalities on the survival rate of entrepreneurial firms. In particular, we trace the population cohort of newly-established and self-employed Swedish firms in the Knowledge-Intensive Business Service (KIBS) sector in 1997 up to 2012 and investigate the role of Marshallian and Jacobian externalities on the survival of these firms. We find that only Jacobian externalities (diversity) is positively associated with the survival of entrepreneurial firms. Not all Jacobian externalities matter though. Only the higher the “related variety” of the region in which an entrepreneurial firm is founded, the higher will be the survival chance of the firm, while “unrelated variety” barely has any significant correlation. The result is robust after controlling for extensive firm characteristics and individual characteristics of the founders. The main message here is: for a newly-established entrepreneurial firm, not only it matters who you are, but also where you are.

Suggested Citation

  • Tavassoli, Sam & Jienwatcharamongkhol, Viroj, 2016. "Survival of Entrepreneurial Firms: The Role of Agglomeration Externalities," Papers in Innovation Studies 2016/28, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
  • Handle: RePEc:hhs:lucirc:2016_028
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    1. repec:taf:regstd:v:53:y:2019:i:1:p:67-79 is not listed on IDEAS
    2. Tavassoli, Sam & Trippl, Michaela, 2017. "The Impact of Ethnic Communities on Immigrant Entrepreneurship: Evidence from Sweden," Papers in Innovation Studies 2017/17, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.

    More about this item

    Keywords

    Entrepreneurial firms; region; agglomeration externalities; survival analysis; related variety; unrelated variety;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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