Spatial Determinants of Entrepreneurship in India

Abstract

We analyze the spatial determinants of entrepreneurship in India in the manufacturing and services sectors. Among general district traits, quality of physical infrastructure and workforce education are the strongest predictors of entry, with labor laws and household banking quality also playing important roles. Looking at the district-industry level, we find extensive evidence of agglomeration economies among manufacturing industries. In particular, supportive incumbent industrial structures for input and output markets are strongly linked to higher establishment entry rates. We also find substantial evidence for the Chinitz effect where small local incumbent suppliers encourage entry. The importance of agglomeration economies for entry hold when considering changes in India's incumbent industry structures from 1989, determined before large-scale deregulation began, to 2005.

Local industrial structures and female entrepreneurship in India

“…Third, we model local labor regulations using state-level variation in policies. Several studies link labor regulations in Indian states to economic progress (Besley andBurgess 2004, Aghion et al 2008), and Ghani et al (2011b) finds labor regulations suppress Indian entrepreneurship generally. van Stel et al (2007) document similar patterns across multiple 12 countries.…”

“…Existing research mostly employs cross-country studies of gender ratios in entrepreneurship (e.g., Minniti 2010, Minniti andNaudé 2010), whereas we analyze local area determinants. Second, our paper contributes to a growing set of spatial studies on entrepreneurship in India (e.g., Khanna 2008, Ghani et al 2011b, Mukim 2011) and a broader set of work on India's industrial organization and economic performance. 1 These contributions constitute an important input to the growing body of work on entrepreneurship and economic advancement in developing countries (e.g., Ardagna and Lusardi 2008, Schoar 2009, Klapper et al 2010.…”

Local Industrial Structures and Female Entrepreneurship in India

“…We also specifically focus here on the local industrial conditions of female-owned businesses. In discussing these results, we identify central findings from Ghani et al (2011b) and Mukim (2011) where appropriate.…”

“…Existing research mostly employs cross-country studies of gender ratios in entrepreneurship (e.g., Minniti 2010, Minniti andNaudé 2010), whereas we analyze local area determinants. Second, our paper contributes to a growing set of spatial studies on entrepreneurship in India (e.g., Khanna 2008, Ghani et al 2011b, Mukim 2011) and a broader set of work on India's industrial organization and economic performance.…”

“…In related work, Ghani et al (2011b) and Mukim (2011) evaluate spatial factors that explain a high rate of entrepreneurship in a district-industry generally and irrespective of the owner's gender. These earlier studies also contrast entry in the organized sector with that in the unorganized sector.…”