Marshallian Agglomeration Economies and Entrepreneurship: The Spanish Case

This paper analyzes to what extent marshallian agglomeration economies affect the creation of new entrepreneurial ventures at the metropolitan level. The measuring of agglomeration economies is based on the construction of indexes using the methodology of Glaeser and Kerr (2009). The indexes attempt to capture the effects of resource sharing, labor matching and knowledge spillovers according to the taxonomy proposed by Marshall (1920). Also an index to measure the influence of small suppliers to attract new business ventures, following Chinitz (1961), is constructed. Data on new firms and employment generated is accounted for the period 2000-2008. The analysis is based on the activity of the 15 largest metropolitan areas in Spain. Sixty two-digit industries (CNAE-93) are considered. The results show that jobs created by entrepreneurs are highly influenced by the ability to share suppliers and customers. Firm creation is influenced by those factors as well as the presence of small suppliers and the proximity to innovative activity. Agglomeration indexes with sector and city fixed effects explain more than 90% of new entry and employment generated. The potential multicollinearity among indexes is tested using principal component analysis. This analysis shows some complementarities among the indexes. New regressions using the factorized terms show that traditional measures of localization economies hide specific information about the process of agglomeration.