The Effect of Broadband Infrastructure on Entrepreneurial Activities: The Case of Germany

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:http://ftp.zew.de/pub/zew-docs/dp/dp11081.pdf Non-technical SummaryIn this paper we investigate whether local characteristics influence entrepreneurial activities. One local characteristic that may drive the decision to establish a firm in a specific region is the supply of infrastructure. Infrastructure important for entrepreneurial activity may take different forms and functions. First, trade and industrial growth require physical infrastructure like streets, rails and waterways. Second, particularly for knowledge-and technology-based ventures the knowledge infrastructure is crucial. Third, an additional type of knowledge spillovers may foster local entrepreneurial activities: the local business community. Those networks may help create specific and tacit business knowledge and contacts which may be vital for entrepreneurial firms. We further focus on a region's broadband availability which may spur entrepreneurial activities. New broadband infrastructure may reduce the necessity of physical proximity. Furthermore, taking broadband as a virtual marketplace and an infrastructure for customer contact, its roll-out and the increase of quality is a requirement for firm formations.Using a county-year panel structure we consider the impact of broadband availability on company foundations and control for standard impact factors on venture activities. The central variable of our analysis is a broadband indicator. Broadband penetration is measured on a county basis. A county is equipped with broadband if at least one main distribution frame (MDF) in the county is upgraded to allow for broadband access. We account for different issues with MDFs: Multiple MDFs may be installed within one county, MDFs at county boundaries do not only provide access to households and companies in that county but also to connected consumers in the neighboring counties, and changes of county boundaries across time must be taken into account.On sector level, we find a significantly positive influence of broadband availability on entrepreneurial intensities in high-tech industries like software and technology-intensive services (knowledge-intensive services). In contrast, no influence exists if we look at all sectors.Moreover, other infrastructural drivers of founding activities follow the results known from the literature. In consequence, our study provides evidence for an additional driver of entrepreneurial activities which supports the ...

Who’s Superconnected and Who’s Not? Investment in the UK’s Information and Communication Technologies (ICT) Infrastructure

“…Places with large technological endowments, which include ICT infrastructure, contribute to the vitality of entrepreneurial and innovative activities. This is particularly the case for high-tech industries like software or knowledge-based services which intensely utilise technology (Heger et al 2011). Indeed, Henderson et al (2007) identified infrastructure as one of the five key factors driving regional entrepreneurship along with human capital, amenities, financial capital and the local economy.…”

Can information and communication technology promote venture creation? A cross-country study using an instrument variable approach

“…Specifically, the use of ICT in a firm’s business operations reduces the importance of the firm’s plant location. For example, Heger et al (2011) argue that the development of ICT infrastructure reduces the necessity of physical proximity, as information and knowledge can be transmitted through the Internet, making physical proximity to knowledge ‘incubators’ dispensable. In addition, a residential Internet connection is a prerequisite for working at home and may allow for new work practices (Autor, 2000).…”

“…The impact of ICT development on venture creation, which is often considered the backbone of a sustainable and growing economy (Heger et al, 2011), has also drawn the attention of scholars. A number of studies argue that the development of ICT can promote and inspire entrepreneurship, leading to more venture creation.…”

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“…Li (2008) documents several case studies showing how the utilization of ICT had helped Chinese female entrepreneurs to start businesses. Heger et al (2011) study county-level data for Germany and find that broadband infrastructure positively affects entrepreneurship in high-tech industries, where efficient knowledge transfer is important. Carlsen and Zhou (2012) utilize the data from 23 OECD countries to conduct a cross-country study and confirm the positive impact of broadband penetration on entrepreneurship.…”