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

Author

Listed:
  • 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.
    Full references (including those not matched with items on IDEAS)

    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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