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

  • 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)

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.

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Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2009-003.

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Date of creation: 12 Jan 2009
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Handle: RePEc:jrp:jrpwrp:2009-003
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  1. Audretsch, D.B. & Klomp, L. & Thurik, A.R., 2002. "Gibrat's Law: are the services different?," ERIM Report Series Research in Management ERS-2002-04-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  2. Eric J. Bartelsman, 2004. "Firm Dynamics and Innovation in the Netherlands A comment on Baumol," De Economist, Springer, vol. 152(3), pages 353-363, 09.
  3. 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.
  4. Marcus Dejardin, 2011. "Linking net entry to regional economic growth," Small Business Economics, Springer, vol. 36(4), pages 443-460, May.
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