Working Paper: NBER ID: w24868
Authors: C. Jara Figueroa; Bogang Jun; Edward L. Glaeser; César Hidalgo
Abstract: How do regions acquire the knowledge they need to diversify their economic activities? How does the migration of workers among firms and industries contribute to the diffusion of that knowledge? Here we measure the industry, occupation, and location specific knowledge carried by workers from one establishment to the next using a dataset summarizing the individual work history for an entire country. We study pioneer firms–firms operating in an industry that was not present in a region–because the success of pioneers is the basic unit of regional economic diversification. We find that the growth and survival of pioneers increase significantly when their first hires are workers with experience in a related industry, and with work experience in the same location, but not with past experience in a related occupation. We compare these results with new firms that are not pioneers and find that industry specific knowledge is significantly more important for pioneer than non-pioneer firms. To address endogeneity we use Bartik instruments, which leverage national fluctuations in the demand for an activity as shocks for local labor supply. The instrumental variable estimates support the finding that industry related knowledge is a predictor of the survival and growth of pioneer firms. These findings expand our understanding of the micro-mechanisms underlying regional economic diversification events.
Keywords: entrepreneurship; economic diversification; human capital; pioneer firms; industry knowledge
JEL Codes: D22; J24; N1; N16; O1; O14; O15; O5; O54; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| industry-specific knowledge of first hires (M51) | survival and growth of pioneer firms (L26) |
| work experience in the same location (M53) | survival and growth of pioneer firms (L26) |
| occupation-specific knowledge (J28) | survival and growth of pioneer firms (L26) |
| industry-specific knowledge of first hires (M51) | regional economic diversification (R11) |
| industry-specific knowledge is more important for pioneers than for non-pioneers (L26) | survival and growth of pioneer firms (L26) |