Working Paper: CEPR ID: DP6945
Authors: David B. Audretsch; Dirk Dohse; Annekatrin Niebuhr
Abstract: In this paper we investigate the determinants of entrepreneurial activity in a cross section of German regions for the period 1998-2005. Departing from the knowledge spillover theory of entrepreneurship, the focus of our analysis is on the role of the regional environment and, in particular, knowledge and cultural diversity. Our main hypothesis is that both, knowledge and diversity, have a positive impact on new firm formation. As the determinants of regional firm birth rates might differ considerably with respect to the necessary technology and knowledge input of new businesses, we consider start-ups at different technology levels. The regression results indicate that regions with a high level of knowledge provide more opportunities for entrepreneurship than other regions. Moreover, while sectoral diversity tendsto dampen new firm foundation, cultural diversity has a positive and highly significant impact on technology oriented start-ups. This suggests that the diversity of people is more conducive to entrepreneurship than the diversity of firms. We conclude that regions characterized by a high level of knowledge and cultural diversity form an ideal breeding ground for technology oriented start-ups.
Keywords: diversity; entrepreneurship; knowledge spillover
JEL Codes: M13; O18; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cultural diversity (Z10) | technology-oriented startups (M13) |
| sectoral diversity (L52) | new firm formation (L26) |
| cultural diversity (Z10) | new business ventures (M13) |
| regional knowledge levels (R10) | entrepreneurship (M13) |
| unemployment rates (J64) | entrepreneurship (M13) |
| population density (J11) | entrepreneurship (M13) |