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Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?

  • Edward L. Glaeser
  • William R. Kerr

Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14407.

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Date of creation: Oct 2008
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Publication status: published as Edward L. Glaeser & William R. Kerr, 2009. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 18(3), pages 623-663, 09.
Handle: RePEc:nbr:nberwo:14407
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