Geography Reference
In-Depth Information
determine economic behaviour (Boschma and Frenken, 2006), of which entrepreneur-
ship is a special class. In the following sections we review the empirical literature that
relates to entrepreneurship, evolution and geography.
Entrepreneurship as an organizational product
Although some individuals become successful entrepreneurs without related prior experi-
ence, they are the exception rather than the rule. Entrepreneurs are often organizational
products, that is, they spin of a i rm from their previous employer (Audia and Rider,
2005, 2006; Klepper, 2001). Many entrepreneurs are characterized by 'sectoral inertia',
that is, they start their i rm in an industry with which they were already familiar (Cross,
1981; Johnson and Cathcart, 1979; Lloyd and Mason, 1984; Storey, 1982; Vivarelli,
1991). Far from the universal choice, entrepreneurial action is relatively constrained:
instead of looking around to seek the most proi table opportunity, the potential entre-
preneur concentrates his or her attention on a familiar sector (Vivarelli, 1991). A person
working in an industry is more likely to identify a market gap than a person without any
industry experience (O'Farrell and Crouchley, 1984), irrespective of the degree of indus-
try competition and growth prospects (Storey, 1982).
This prior experience (Shane, 2000) and personal networks are likely to be acquired
during the entrepreneur's career in existing organizations (Agarwal et al., 2004; Gompers
et al., 2005; Klepper, 2001). This explains why the nature and number of organizations in
a region are important determinants of entrepreneurship in a region.
Empirical research has shown that regions dominated by small and/or young i rms
have relatively high new i rm formation rates (Audretsch and Fritsch, 1994; Johnson
and Cathcart, 1979; Mason, 1991; Mueller, 2006; Reynolds et al., 1994; Sørensen, 2007).
This stylized fact may be caused by several mechanisms: experiential learning, vicarious
learning, competition, and entry barriers. The latter three mechanisms will be discussed
in the section on industry structure. In this section we discuss experiential learning as
well as vicarious learning (peer ef ects). The greater the proportion of an industry's
labour force with direct experience of working in smaller i rms, the more widespread the
propensity for self-employment and hence the greater the propensity to start a new i rm.
Industries dominated by large plants would be expected to perform poorly as incuba-
tors of new business founders (Gudgin, 1978, pp. 211-12; Johnson and Cathcart, 1979).
Young organizations especially that were once venture capital-backed, that focused on
one segment, and whose growth slowed, have high 'entrepreneurial spawning' levels
(Gompers et al., 2005). Next to direct, experiential learning (learning how to set up and
grow a business) peer ef ects are also important here. A study by Nanda and Sørensen
(2008) showed that an individual is more likely to become an entrepreneur if his or her
co-workers have been entrepreneurs before. They argue that peers matter in two ways for
entrepreneurship: by structuring co-workers' access to information and resources that
help identify entrepreneurial opportunities, and by inl uencing co-workers' perceptions
about entrepreneurship as a career choice.
Klepper and colleagues (Klepper, 2001, 2002, 2006, 2007; Klepper and Simons, 2000;
Klepper and Sleeper, 2005; and Buenstorf and Klepper, 2009; Agarwal et al., 2004;
Buenstorf and Fornahl, 2009; see also Helfat and Lieberman, 2002; and Dahl et al.,
Chapter 9, this volume) have constructed a model in which spin-of s exploit knowledge
from their parents. Firms are assumed to dif er in terms of their initial competence at
