Knowledge, diversity and entrepreneurship: a spatial analysis of new firm formation in Great Britain

Abstract

This paper argues that the diversity of a region's knowledge stock and its balance between knowledge-based manufacturing and services are both important determinants of variations in the rate of new business formation across spatial areas. An empirical study of new firm formation across 408 local unitary authorities and districts in Great Britain over the period 2001-2007 is presented, taking explicit account of the interactions amongst spatial units through an econometric modelling procedure involving maximum likelihood spatial models and alternative spatial weighing matrices. The results indicate that both related and unrelated knowledge diversity have a positive impact on the rate of business formation, whilst aggregate local economy-wide industrial and ethnic diversity has no impact; the division of the knowledge stock between services and manufacturing is also significant, with services having a positive impact on new business formation in contrast to a negative impact for hightechnology manufacturing. There is also some support for the view that low wages and economic inactivity constrain new business formation, whilst a competitive regional environment has a positive impact. The results imply that polices should be aimed at creating a diverse set of knowledge-based industries rather than specialization in a narrow range.

The geography of new business formation in the Czech Republic: a cross-section analysis (2003-2014)

“…On the one hand, unemployment means less entrepreneurial opportunities because it constrains demand, negatively inuencing new business formation rates (Delfmann et al, 2014;Lafuente & Vaillant, 2010). On the other hand, unemployment increases the supply of potential entrepreneurs, positively inuencing new business formation rates (Bishop, 2012;Armington & Acs, 2002;Audretsch & Fritsch, 1994). Therefore, the nature of unemployment's inuence on new business formation is not apriori clear (Fotopoulos, 2014;Bishop, 2012;Wyrwich, 2012).…”

“…The essence of this theory is that new knowledge is not fully exploited by the creators (Bishop, 2012). Subsequently, 'unused' knowledge is the source of entrepreneurial opportunities.…”

“…It is claimed that the greater the stock of local knowledge, the more entrepreneurial opportunities may arise and be exploited, resulting in high new business formation rates (Bishop, 2012;Lee, Florida & Acs, 2004). In this regard, spatial proximity and the quality of human capital that enhance knowledge spillovers are essential elements of the theory (Fotopoulos, 2014;Bishop, 2012). The stock of local knowledge has been empirically measured in different ways, including patent activities (Lee, Florida & Acs, 2004).…”

“…Three types of agglomeration economies are generally considered: (a) the availability of the pooled labour force; (b) non-pecuniary externalities; and (c) knowledge and information spillovers (Lafuente & Vaillant, 2010;Armington & Acs, 2002). New businesses locate themselves in order to take advantage of agglomeration economies (Audretsch & Fritsch, 1994) that have been measured in a number of different ways, including population density (Bishop, 2012;Audretsch & Fritsch, 1994;Lafuente & Vaillant, 2010) and the quality of human capital (Wyrwich, 2012;Lee, Florida & Acs, 2004;Armington & Acs, 2002). Human capital is also regarded to be a supply-side factor of new business formation because it is claimed that better-educated people are more equipped to identify and exploit entrepreneurial opportunities (Fotopoulos, 2014;Lee, Florida & Acs, 2004).…”

“…Several authors mention the link between entrepreneurship on the one hand and the nature of regional disparities on the other (Novák & Netrdová, 2011;Barjak, 2001), thereby stimulating the interest in researching regional determinants of new business formation. However, most of these studies concerned 'old' capitalist countries (Bishop, 2012;Fotopoulos, 2014;Delfmann et al, 2014;Armington & Acs, 2002) while only a few studies dealt with determinants of new business formation in the post-communist context (Wyrwich, 2012;Lafuente & Vaillant, 2010;Fritsch et al, 2014;Hájek, Nekolová & Novosák, 2015 as notable exceptions). Therefore, this paper, aiming to identify regional determinants of new business formation in the Czech Republic (2003Republic ( -2014, adds some new evidence to the research debate.…”