Skip to main content

Advertisement

SpringerLink
Log in

Agglomeration economies, inventors and entrepreneurs as engines of European regional economic development

  • Special Issue Paper
  • Published:
The Annals of Regional Science Aims and scope Submit manuscript

Abstract

In economic agglomeration studies, the distinction of various externalities circumstances related to knowledge spillovers remains largely unclear. This paper introduces human capital, innovation and several types of entrepreneurship as potential drivers of regional economic performance with an impact of agglomeration economies. We use measures of specific types of entrepreneurship, discerned at the individual level, as well as human capital and invention through patenting activity for the period 2001–2006. The empirical application on 111 regions across 14 European countries investigates their relation with observed regional productivity rates in 2006. Our main findings indicate that (i) human capital, patenting activity and entrepreneurship are all linked to regional performance, more so in regions containing large as well as medium-sized cities; (ii) they act as complements rather than substitutes, facilitating productivity differently; and (iii) accounting for patenting activity and entrepreneurship captures agglomeration externalities effects previously subscribed only to the density of resources of regional performance. The particular role of regions with medium-sized cities next to regions with large cities complies with observed growth trends as well as recently proposed place-based development approaches that assume that interactions between institutions and geography are critical for regional economic performance.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Notes

  1. The adjective ‘objective-1’ is specifically associated with European Regional Development Funds (ERDF) in the programming period 2000–2006. ERDF aims to strengthen economic and social cohesion in the European Union by correcting imbalances between its regions and mainly refers as ‘objective-1’ to the regions lagging behind in terms of development. The term is region (Europe) and time (2000–2006) specific. In the new programming period, the old ‘objective 1’ regions together with the Cohesion Fund are understood as ‘convergence regions’ and consider as well ‘objective 2’ regions (Dühr et al. 2010, pp. 273–286). In our research period, although objective-1 regions are not the only representatives of cohesion policy regions, they form an important part of it (compare Dogaru et al. 2011; Lopez-Rodriguez and Faiña 2006). For regions in Slovenia in our analyses, we used preaccession funds as indicator. Objective-1 regions can be both urban and rural in character.

  2. The initial spatial scale was adopted along a regional classification developed by ESRI and consisted of 125 regions corresponding to Nuts1 levels for Belgium, France, Germany, Greece, Ireland, the Netherlands, and the United Kingdom. Nuts2 levels are applied to Croatia, Denmark, Finland, Hungary, Norway, Portugal, Slovenia, and Sweden, and a combination of Nuts1 and Nuts2 to Italy, Spain, and Switzerland. In a second step, some dense sub-regions were identified within the previously identified larger regions; if the sample size allowed, these dense regions are abstracted and treated separately from the larger region of which they form part. This resulted in an augmented sample of 142 regions.

  3. This is no problem for our data set, as we deal with Nuts2 regions in these countries in our analysis.

  4. We would like to point out that the entrepreneurship measure in our analysis disregards entrepreneurial activity conducted by employees. In Bosma et al. (2012), in a first international comparison of entrepreneurial employee activity, countries like Sweden, Belgium and France appear to exhibit relatively high levels of entrepreneurial employee activity.

  5. There is also no significant correlation between the error terms resulting from our regression and the acreage of the region.

  6. Although this distinction differs somewhat from that in OECD (2012), these cutoff points yield a distribution for the European regional classification adopted in the paper that is comparable to the OECD-distribution on a global scale.

  7. Even though the coefficient for the specialization/diversity measure is not significant, its addition to model 2b leads to a better model fit (\(p<0.05\)).

  8. Auxiliary regressions (not reported) indicate very similar outcomes for Tables 2 and 3 when applying random effects estimation.

  9. Using a binary weight matrix with information on neighbouring regions, the Getis–Ord statistics did not point at spatial lags for the dependent and independent variables, nor for the residuals. In contrast to the more often used Moran’s I statistic, the Getis–Ord statistic focuses on clustering of high and low values (Getis and Ord 1992), which would be the relevant issue of concern in our analysis.

  10. The correlations between these variables are not very high (and never higher than 0.61).

References

  • Acs ZJ (2002) Innovation and the growth of cities. Edward Elgar, Cheltenham

  • Acs ZJ (2008) Foundations of high impact entrepreneurship. Jena economic research papers. \(\#\), 2008–060. Max Planck Institute of Economics, Jena

  • Acs ZJ, Armington C (2004) Employment growth and entrepreneurial activity in cities. Reg Stud 38:911–927

    Google Scholar 

  • Acs ZJ, Varga A (2005) Entrepreneurship, agglomeration and technological change. Small Bus Econ 24(3):323–334

    Article  Google Scholar 

  • Acs ZJ, Storey DJ (2004) Introduction: entrepreneurship and economic development. Reg Stud 38(8):871–877

    Google Scholar 

  • Acs ZJ, Plummer LA (2005) Penetrating the “knowledge filter” in regional economies. Ann Reg Sci 39(3):439–456

    Article  Google Scholar 

  • Acs ZJ, Audretsch DB, Braunerhjelm P, Carlsson B (2010) The missing link: knowledge diffusion and entrepreneurship in endogenous growth. Small Bus Econ 34(2):105–125

    Article  Google Scholar 

  • Acs ZJ, Bosma NS, Sternberg R (2011) Entrepreneurship in world cities. In: Minniti M (ed) The dynamics of entrepreneurial activity. Oxford University Press, Oxford, pp 125–151

    Chapter  Google Scholar 

  • Aghion P, Blundell R, Grifith R, Howitt P, Prantl S (2009) The effects of entry on incumbent innovation and productivity. Rev Econ Stat 91(9):20–32

    Article  Google Scholar 

  • Andersson M, Koster S (2011) Sources of persistence in regional start-up rates-evidence from Sweden. J Econ Geogr 11(1):179–201

    Google Scholar 

  • Artis MJ, Miguelez E, Moreno R (2012) Agglomeration economies and regional intangible assets: an empirical investigation. J Econ Geogr, first published, online 4 Nov 2011. doi:10.1093/jeg/lbr031

  • Asheim BT (1996) Industrial districts as ‘learning regions’: a condition for prosperity. Eur Plan Stud 4(4):379–400

    Article  Google Scholar 

  • Audretsch DB, Feldman MP (1996) R &D spillovers and the geography of innovation and production. Am Econ Rev 86(3):630–640

    Google Scholar 

  • Audretsch DB, Keilbach MP (2005) Entrepreneurship capital and regional growth. Ann Reg Sci 39:457–469

    Article  Google Scholar 

  • Barca F (2009) An agenda for a reformed cohesion policy: a place-based approach to meeting European Union challenges and expectations. Report for the European Commission, Brussels

  • Barca F, McCann P, Rodriguez-Pose A (2012) The case for regional development intervention: place-based versus place-neutral approaches. J Reg Sci 52:134–152

    Article  Google Scholar 

  • Baumol WJ (1990) Entrepreneurship: productive, unproductive, and destructive. J Polit Econ 98(5):893–921

    Article  Google Scholar 

  • Beaudry C, Schiffauerova A (2009) Who’s right, Marshall or Jacobs? The localization versus urbanization debate. Res Policy 38:318–337

    Article  Google Scholar 

  • Becker R, Henderson JV (2000) Intraindustry specialization and urban development. In: Huriot JM, Thisse JF (eds) Economics of cities: theoretical perspectives. Cambridge University Press, Cambridge, pp 138–166

  • Bosker M (2007) Growth, agglomeration and convergence: a space-time analysis for European regions. Spatial Econ Anal 2:91–108

    Article  Google Scholar 

  • Bosma NS, Van Praag M, Thurik R, De Wit G (2004) The value of human and social capital investments for the business performance of startups. Small Bus Econ 23(3):227–236

    Article  Google Scholar 

  • Bosma N, Schutjens V, Stam E (2009) Entrepreneurship in European regions: implications for public policy. In: Leitao J, Baptista R (eds) Public policies for fostering entrepreneurship. Springer, New York, pp 59–89

    Chapter  Google Scholar 

  • Bosma NS (2011) Entrepreneurship, urbanisation economies and productivity of European regions. In: Fritsch MF (ed) Handbook of research on entrepreneurship and regional development, Cheltenham (UK). Edward Elgar, Northampton, pp 107–132

  • Bosma NS, Wennekers S, Amorós JE (2012) Global entrepreneurship monitor 2011 extended global report: entrepreneurs and entrepreneurial employees across the globe, Babson Park, MA, US: Babson College, Santiago, Chile: Universidad del Desarollo, Kuala Lumpur, Malaysia: Universiti Tun Abdul Razak and London, UK: Global Entrepreneurship Research Association

  • Bosma NS, Stam E, Schutjens VAJM (2011) Creative destruction and regional productivity growth: evidence from Dutch manufacturing and services. Small Bus Econ 36(4):401–418

    Article  Google Scholar 

  • Brenner T, Fornahl D (2008) Regional path-dependence in start-up activity. Papers in evolutionary economic geography nr. 08.12. Utrecht University, Utrecht

  • Breschi S, Lissoni F (2009) Mobility of skilled workers and co-invention networks: an anatomy of localized knowledge flows. J Econ Geogr 9:439–468

    Article  Google Scholar 

  • Breschi S, Malerba F, Orsenigo L (2000) Technologicl regimes and Schumpetarian patterns of innovation. Econ J 110(463):388–410

    Article  Google Scholar 

  • Camagni R (ed) (1991) Innovation networks. Spatial perspectives. Bellhaven Press, London

  • Ciccone A (2002) Agglomeration effects in Europe. Eur Econ Rev 46(2):213–227

    Article  Google Scholar 

  • Ciccone A, Hall RE (1996) Productivity and the density of economic activity. Am Econ Rev 86(1):54–70

    Google Scholar 

  • Combes PP, Overman H (2004) The spatial distribution of economic activities in the European Union. In: Henderson JV, Thisse J (eds) Handbook of regional and urban economics. Elsevier, Amsterdam, pp 2120–2167

  • Cooke P (2001) Regional innovation systems, clusters, and the knowledge economy. Ind Corp Change 10(4):945–974

    Article  Google Scholar 

  • Coyne CJ, Sobel RS, Dove JA (2010) The non-productive entrepreneurial process. Rev Austrian Econ. doi:10.1007/s11138-010-0124-2

  • De Groot HLF, Poot J, Smit MJ (2009) Agglomeration externalities, innovation and regional growth: theoretical perspectives and meta-analysis. In: Nijkamp P, Capello R (eds) Handbook of regional growth and development theories. Edward Elgar, pp 256–281

  • Dogaru T, van Oort F, Thissen M (2011) Agglomeration economies in European regions: perspectives for objective-1 regions. Tijdschrift voor Econ Soc Geogr 102:486–494

    Article  Google Scholar 

  • Dühr S, Colomb C, Nadin V (2010) European spatial panning and territorial cooperation. Routledge, London

  • Duranton G, Puga D (2001) Nursery cities: urban diversity, process innovation, and the life cycle of products. Am Econ Rev 91:1454–1477

    Article  Google Scholar 

  • Duranton G, Puga D (2004) Micro-foundations of urban agglomeration economies. In: Henderson JV, Thisse J-F (eds) Handbook of urban and regional economics, vol. 4. North Holland, New York, pp 2063–2118

  • Feser EJ (2002) Tracing the sources of local external economies. Urban Stud 39:2485–2506

    Article  Google Scholar 

  • Frenken K, van Oort FG, Verburg T (2007) Related variety, unrelated variety and regional economic growth. Reg Stud 41:685–697

    Article  Google Scholar 

  • Fritsch M, Mueller P (2007) The persistence of regional new business formation-activity over time—assessing the potential of policy promotion programs. J Evol Econ 17:299–315

    Article  Google Scholar 

  • Fritsch M, Mueller P (2008) The effect of new business formation on regional development over time: the case of Germany. Small Bus Econ 30(1):15–29

    Article  Google Scholar 

  • Fritsch M, Schroeter A (2011) Why does the effect of new business formation differ across regions? Small Bus Econ 36(4):383–400

    Article  Google Scholar 

  • Getis A, Ord JK (1992) The analysis of spatial association by use of distance statistics. Geogr Anal 24(3):189–206

    Article  Google Scholar 

  • Glaeser EL, Kallal HD, Scheinkman JA, Schleifer A (1992) Growth in cities. J Polit Econ 100:1126–1152

    Article  Google Scholar 

  • Glaeser EL, Maré DC (2001) Cities and Skills. J Labor Econ 19(2):316–342

    Google Scholar 

  • Henderson JV (2003) Marshall’s scale economies. J Urban Econ 53:1–28

    Article  Google Scholar 

  • Holcombe RG (1998) Entrepreneurship and economic growth. Q J Austrian Econ 1(2):45–62

    Article  Google Scholar 

  • Jaffe AB, Trajtenberg M, Henderson R (1993) Geographic localization and knowledge spillovers as evidenced by patent citations. Q J Econ 108:577–598

    Article  Google Scholar 

  • Keeble D, Wever E (1986) New firms and regional development in Europe. Croom Helm, London

    Google Scholar 

  • Koster S (2007) The entrepreneurial and replication function of new firm formation. Tijdschr Econ Soc Geogr 98(5):667–674

    Article  Google Scholar 

  • Krugman P (2009) The increasing returns revolution in trade and geography. Am Econ Rev 99:561–571

    Article  Google Scholar 

  • Lopez-Rodriguez J, Faiña A (2006) Objective 1 regions versus non-Objective 1 regions: what does the Theil Index tell us? Appl Econ Lett 13:815–820

    Google Scholar 

  • Marrocu E, Paci R, Usai S (2012) Productivity growth in the old and new Europe: the role of agglomeration externalities. J Reg Sci. doi:10.111/jors.12000

  • Martin R, Sunley P (2006) Path dependence and regional economic evolution. J Econ Geogr 6:395–437

    Article  Google Scholar 

  • McCann P, van Oort FG (2009) Theories of agglomeration and regional economic growth: a historical review. In: Capello R, Nijkamp P (eds) Handbook of regional growth and development theories. Edward Elgar, Cheltenham, pp 19–32

    Google Scholar 

  • Melo PC, Graham DJ, Noland RB (2009) A meta-analysis of estimates of urban agglomeration economies. Reg Sci Urban Econ 39:332–342. doi:10.1016/j.regsci.urbeco.2008-12.002

    Google Scholar 

  • Montfort P (2009) Regional convergence, growth and interpersonal inequalities across the EU. DG Regional Policy, European Commission

  • OECD (2009) Regions matter: economic recovery, innovation and sustainable growth. OECD, Paris

  • OECD (2011) Regions at a glance 2011. OECD, Paris

  • OECD (2012) Redefining “urban”. A new way to measure metropolitan areas, OECD, Paris

  • Olson M (1982) The rise and decline of nations: economic growth, stagflation, and social rigidities. Yale University Press, Connecticut

    Google Scholar 

  • Ottaviano GP (2011) ‘New’ new economic geography: firm heterogeneity and agglomeration economies. J Econ Geogr 11:231–240

    Article  Google Scholar 

  • Parker SC (2005) Explaining regional variations in entrepreneurship as multiple equilibria. J Reg Sci 45:829–850

    Article  Google Scholar 

  • Reynolds P, Storey DJ, Westhead P (1994) Crossnational comparisons of the variation in new firm formation rates: an editorial overview. Reg Stud 28(4):343–346

    Article  Google Scholar 

  • Reynolds PD, Bosma NS, Autio E, Hunt S, De Bono N, Servais I, Lopez-Garcia P, Chin N (2005) Global entrepreneurship monitor: data collection design and implementation 1998–2003. Small Bus Econ 24(3):205–231

    Article  Google Scholar 

  • Rosenthal SS, Strange WC (2004) Evidence on the nature and sources of agglomeration economies. In: Henderson JV, Thisse J-F (eds) Handbook of urban and regional economics, vol 4. Elsevier, Amsterdam, pp 2119–2172

    Google Scholar 

  • Rosenthal SS, Strange WC (2001) The determinants of agglomeration. J Urban Econ 59:191–229

    Article  Google Scholar 

  • Santarelli E, Vivarelli M (2007) Entrepreneurship and the process of firms’ entry, survival and growth. Ind Corp Change 16(3):455–488

    Article  Google Scholar 

  • Schumpeter JA (1947) The creative responses in economic history. J Econ Hist 7(2):149–159

    Google Scholar 

  • Schumpeter JA (1934) The theory of economic development. Harvard University Press, Cambridge

    Google Scholar 

  • Schumpeter JA (1942) Capitalism, socialism and democracy. Harper and Row, New York

    Google Scholar 

  • Stam E (2008) Entrepreneurship and innovation policy. In: Nooteboom B, Stam E (eds) Micro-foundations for innovation policy. Amsterdam University Press, Amsterdam

    Google Scholar 

  • Storper M (1992) The limits to globalization. Technology districts and international trade. economic Geogr 68(1):60–93

    Article  Google Scholar 

  • Tamásy C (2006) Determinants of regional entrepreneurship dynamics in contemporary Germany: A Conceptual and Empirical Analysis. Reg Stud 40(4):365–384

    Google Scholar 

  • Thissen MJPM, Ruijs A, van Oort F, Diodato D (2011) De concurrentiepositie van Nederlandse regio’s. Regionaal-economicsche samenhang in Europa, Netherlands Environmental Assessment Agency (PBL), The Hague

  • Thoma G, Torrisi S, Gambardella A, Guellec D, Hall BH, Harhoff D (2010) Harmonizing and combining large datasets—an application to firm-level patent and accounting data. NBER working paper 15851, National Bureau of Economic Research, Cambridge

  • United Nations (2007) World population prospects: the 2006 revision and world urbanization prospects: the 2007 revision. Population division of the Department of economic and social affairs, UN Washington

  • Van den Born JA (2009) The drivers of career success of the job-hopping professional in the new networked economy; The challenges of being an entrepreneur and an employee. Ph.D Dissertation Utrecht University, Utrecht/Born to Grow

  • Van Oort F, Lambooy J (2012, forthcoming) Cities, knowledge and innovation. In: Fischer M, Nijkamp P (eds) Handbook of regional science. Springer, Berlin

  • Van Oort FG, Burger M, Knoben J, Raspe O (2012) Multilevel approaches and the firm-agglomeration ambiguity in economic growth studies. J Econ Surv 26:468–491

    Article  Google Scholar 

  • World Bank (2009) World Development Report: Reshaping economic geography. World Bank, Washington, DC

Download references

Author information

Authors and Affiliations

  1. Urban and Regional Research Center Utrecht, Utrecht University, PO Box 80115, 3508TC, Utrecht, The Netherlands

    Frank G. van Oort

  2. Utrecht School o Economics, Utrecht University, PO Box 80215, 3508TC,  Utrecht, The Netherlands

    Niels S. Bosma

Authors
  1. Frank G. van Oort
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Niels S. Bosma
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Frank G. van Oort.

Appendix

Appendix

See Table 5.

Table 5 Regions included in the empirical analysis
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

van Oort, F.G., Bosma, N.S. Agglomeration economies, inventors and entrepreneurs as engines of European regional economic development. Ann Reg Sci 51, 213–244 (2013). https://doi.org/10.1007/s00168-012-0547-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00168-012-0547-8

JEL Classification

Search

Navigation