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Ready, set, go! Why are some regions entrepreneurial jump-starters?

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  • Michael Wyrwich

    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

Abstract

Previous research on market economies characterized by stable framework conditions shows that several regional factors determine start-up activity. Not much is known about what drives entrepreneurship in unstable environments characterized by significant institutional changes that affect the availability of entrepreneurial opportunities. To fill this gap, this paper focuses on post- communist regions in which start-up activity was basically nonexistent under socialism but significantly more in evidence after the institutional shock of introducing a market economy. It is argued and shown that the allocation of talent into productive entrepreneurship is higher in areas abundantly endowed with individuals who have a relatively high ability to detect viable entrepreneurial opportunities, as indicated by their qualification, and in regions home to a population that is characterized by a high alertness toward opportunities, as indicated by remnants of an entrepreneurial culture that pre- dates socialism. How institutional context affects entrepreneurship over the course of transition is reflected by the negative relationship between urbanization and entrepreneurship that presumably has to do with ill-devised socialist urban planning policies. The regional application of the theory on institutions and entrepreneurship outlined in this paper shows that an entrepreneurial rebound after an adverse large-scale shock accompanied by massive structural change and economic dislocation is most pronounced in areas with a strong human capital basis and a regional culture that favors entrepreneurship.

Suggested Citation

  • Michael Wyrwich, 2013. "Ready, set, go! Why are some regions entrepreneurial jump-starters?," Jena Economic Research Papers 2013-037, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2013-037
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    Cited by:

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    3. Michael Fritsch & Elisabeth Bublitz & Alina Sorgner & Michael Wyrwich, 2014. "How much of a socialist legacy? The re-emergence of entrepreneurship in the East German transformation to a market economy," Small Business Economics, Springer, vol. 43(2), pages 427-446, August.

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    More about this item

    Keywords

    Entrepreneurship; regional knowledge; transition;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • P25 - Economic Systems - - Socialist Systems and Transition Economies - - - Urban, Rural, and Regional Economics

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