Related variety and firm heterogeneity. What really matters for short-run firm growth?

Abstract

In this article, we contend that entrepreneurship studies would greatly benefit from engagement with contemporary theorizations of practice. The practice tradition conceives of the process of entrepreneuring as the enactment and entanglement of multiple practices. Appreciating entrepreneurial phenomena as the enactment and entanglement of practices orients researchers to an ontological understanding of entrepreneuring as relational, material and processual. Therefore, practice theories direct scholars towards observing and explaining the real-time practices of entrepreneuring practitioners. Articles in this special issue on 'entrepreneurship-as-practice' are discussed and suggestions for future research and scholarship that utilize contemporary theorizations of practice are offered.

Firm‐level productivity growth returns of social capital: Evidence from Western Europe

“…They account for the hierarchical structure of the data at the expense of a causal interpretation of the results-see, for example, Neira et al (2018) in the context of regional social capital and individual subjective well-being, Agostino et al (2020) for regional institutional quality and firm productivity, and Bykova and Coates (2020) for regional economic freedom and firm performance. Although our estimation strategy-based on a combination of Heckman (1979)-style and IV approachesdoes not account for the hierarchical structure of the data-that is, firms "nested" within regions-it adequately deals with sample selection and endogeneity issues that existing firm-level studies have highlighted as key for identifying the causal effect of a regional phenomenon on firm-level performance (e.g., Cainelli & Ganau, 2019;Ganau & Rodríguez-Pose, 2018). As we will discuss later in the paper, our main results are robust when relying on a multilevel estimation approach.…”

“…However, two key econometric issues arise: sample selection and endogeneity of the social capital variable. Sample selection can bias the OLS estimation of Equation ( 5) because labor productivity growth is observed only for the subsample of firms surviving over the growth period 2010-2017 (Cainelli & Ganau, 2019;Ganau & Rodríguez-Pose, 2018). Endogeneity can arise for three main reasons.…”

Unpacking the U‐shaped relationship between related variety and firm sales: Evidence from Japan

“…Although Frenken et al (2007) argued that their related variety perspective is built on knowledge base theory, it is difficult to judge whether two industries share the same or a similar knowledge base. For example, it is possible that two industries share the same or a similar knowledge base in terms of business model, but do not have such a base in terms of technology (Cainelli & Ganau, 2019). Accordingly, Frenken et al, (2007) based their related variety perspective on industrial classification system, regardless of whether it is the North American Industrial Classification System (NAICS), Standard Industrial Classification (SIC), the NACE system, or another system.…”

“…Lucio et al (2002) identified a U-shaped relationship when investigating the impact of industrial structure on productivity growth in Spanish industry, and they also used the instrumental variable method to relieve endogeneity. More recently, when considering the impact of related variety on firm performance, Cainelli and Ganau (2019) revealed that related variety is a positive predictor of firms' employment growth. The discrepancy between our nonlinear conclusion and their linear conclusion may be due to the fact that we use sales to measure firm performance.…”

“…Only a few papers (for example, Aarstad et al (2016, 2019), Cainelli and Ganau (2019)) have attempted to respond to Content and Frenken's call. However, as most previous studies suggested that related variety has a linear relationship with regional development (Boschma et al, 2012), a research gap appears: does such a conclusion apply to the firm level?…”