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Entrepreneurship and cities: evidence from the post-communist world


  • Maksim Belitski


  • Julia Korosteleva


We investigate variation in entrepreneurial activity across 98 Eastern Neighbourhood cities. The aim of study is twofold: to bridge the city-level gap in empirical research on entrepreneurship in the Eastern Neighbourhood urban areas; to focus on urban heterogeneity in entrepreneurship unlike regional level studies which deal both with urban and rural areas where entrepreneurial activity has different characteristics. Finally, in accordance with urban incubator hypothesis the incidence of entrepreneurship is higher in urban agglomerations. To measure entrepreneurship a number of small businesses is used which has been widely used in a number of studies for capturing entrepreneurial activities. We employ the System GMM estimator to establish our model, which is determined by the need to address some econometric problems, including the problem of potential endogeneity of some of our regressors; the presence of predetermined variables, namely the lagged dependent variable; the presence of fixed effects which may be correlated with the repressors; finite sample. We find that the heterogeneity in entrepreneurship is largely explained by the agglomeration effects and city socio-economic characteristics such as level of poverty. On the one hand this is puzzling, as the general perception of the nature of entrepreneurial activity in these countries is that it is necessity-driven. On the other hand, the role of the government and social benefits still seem to play an important role in the countries of transition discouraging individuals from considering entrepreneurship as a way out of poverty. We fail to support the hypothesis of Moscow proximity as an important driver for small business activity in these cities. At the same time our findings support capital-city hypothesis as an incubator for business start-ups. Unfortunately, the level of capital stock and criminality add little in explaining the variation of entrepreneurship. We also do not find any robust effect of transition reforms, including small-scale privatisation, banking transformation and business regulation on entrepreneurial entry in the Eastern Neighbourhood cities.

Suggested Citation

  • Maksim Belitski & Julia Korosteleva, 2011. "Entrepreneurship and cities: evidence from the post-communist world," ERSA conference papers ersa11p288, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p288

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    References listed on IDEAS

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    Cited by:

    1. David Audretsch & Maksim Belitski & Sameeksha Desai, 2015. "Entrepreneurship and economic development in cities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(1), pages 33-60, October.
    2. David Audretsch & Maksim Belitski, 2013. "The missing pillar: the creativity theory of knowledge spillover entrepreneurship," Small Business Economics, Springer, vol. 41(4), pages 819-836, December.

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