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Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries

Author

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  • Niels Bosma

    (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands)

  • Erik Stam

    () (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany)

  • Veronique Schutjens

    (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands)

Abstract

Do 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, 2009. "Creative Destruction and Regional Productivity Growth: Evidence from the Dutch Manufacturing and Services Industries," Jena Economic Research Papers 2009-003, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2009-003
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    References listed on IDEAS

    as
    1. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
    2. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    3. Marcus Dejardin, 2011. "Linking net entry to regional economic growth," Small Business Economics, Springer, vol. 36(4), pages 443-460, May.
    4. Eric J. Bartelsman, 2004. "Firm Dynamics and Innovation in the Netherlands A comment on Baumol," De Economist, Springer, vol. 152(3), pages 353-363, September.
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    Cited by:

    1. Mirjam Praag & André Stel, 2013. "The more business owners, the merrier? The role of tertiary education," Small Business Economics, Springer, vol. 41(2), pages 335-357, August.
    2. ITO Keiko & KATO Masatoshi, 2012. "Does New Entry Drive Out Incumbents? Evidence from establishment-level data in Japan," Discussion papers 12034, Research Institute of Economy, Trade and Industry (RIETI).
    3. Fabrizio Coricelli & Andreas Wörgötter, 2012. "Structural Change and the Current Account: The Case of Germany," OECD Economics Department Working Papers 940, OECD Publishing.
    4. Fritsch, Michael, 2013. "New Business Formation and Regional Development: A Survey and Assessment of the Evidence," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 9(3), pages 249-364, February.
    5. Keiko Ito & Masatoshi Kato, 2016. "Does new entry drive out incumbents? The varying roles of establishment size across sectors," Small Business Economics, Springer, vol. 46(1), pages 57-78, January.
    6. Kent Eliasson & Hans Westlund, 2013. "Attributes influencing self-employment propensity in urban and rural Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(2), pages 479-514, April.
    7. Anokhin, Sergey & Wincent, Joakim, 2014. "Technological arbitrage opportunities and interindustry differences in entry rates," Journal of Business Venturing, Elsevier, vol. 29(3), pages 437-452.
    8. Brixy, Udo & Murmann, Martin, 2016. "The growth and human capital structure of new firms over the business cycle," IAB Discussion Paper 201642, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Marco Vivarelli, 2012. "Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1286, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    10. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press, vol. 22(6), pages 1453-1495, December.
    11. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    12. Nerine Mary George & Sergey Anokhin & Vinit Parida & Joakim Wincent, 2015. "Technological advancement through imitation by industry incumbents in strategic alliances," Chapters,in: Innovation and Entrepreneurship in the Global Economy, chapter 3, pages 65-88 Edward Elgar Publishing.
    13. Michael Fritsch & Alexandra Schroeter, 2011. "Why does the effect of new business formation differ across regions?," Small Business Economics, Springer, vol. 36(4), pages 383-400, May.
    14. Fritsch, Michael & Changoluisa, Javier, 2017. "New business formation and the productivity of manufacturing incumbents: Effects and mechanisms," Journal of Business Venturing, Elsevier, vol. 32(3), pages 237-259.
    15. Michael Fritsch, 2011. "The effect of new business formation on regional development - Empirical evidence, interpretation, and avenues for further research," Jena Economic Research Papers 2011-006, Friedrich-Schiller-University Jena.
    16. Michael Fritsch, 2012. "Methods of analyzing the relationship between new business formation and regional development," Jena Economic Research Papers 2012-064, Friedrich-Schiller-University Jena.
    17. Semiha Turgut & Aliye Ahu Akgun, 2015. "The Causality Between Entrepreneurial Activities and Regional Economic Growth: Case of Turkey," ERSA conference papers ersa15p1093, European Regional Science Association.
    18. repec:krk:eberjl:v:5:y:2017:i:4:p:111-133 is not listed on IDEAS
    19. Félix Modrego & Philip McCann & William Foster & M. Olfert, 2015. "Regional entrepreneurship and innovation in Chile: a knowledge matching approach," Small Business Economics, Springer, vol. 44(3), pages 685-703, March.
    20. Mendoza-Abarca, Karla I. & Anokhin, Sergey & Zamudio, César, 2015. "Uncovering the influence of social venture creation on commercial venture creation: A population ecology perspective," Journal of Business Venturing, Elsevier, vol. 30(6), pages 793-807.
    21. Jeroen Content & Koen Frenken, 2016. "Related variety and economic development:a literature review," Papers in Evolutionary Economic Geography (PEEG) 1621, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2016.
    22. Frank Oort & Niels Bosma, 2013. "Agglomeration economies, inventors and entrepreneurs as engines of European regional economic development," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 213-244, August.
    23. Henry Renski, 2014. "The Influence of Industry Mix on Regional New Firm Formation in the United States," Regional Studies, Taylor & Francis Journals, vol. 48(8), pages 1353-1370, August.

    More about this item

    Keywords

    firm entry; firm exit; turbulence; regional competitiveness; total factor productivity;

    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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