The Annals of Regional Science

, Volume 46, Issue 3, pp 621–636 | Cite as

Who’s got the aces up his sleeve? Functional specialization of cities and entrepreneurship

  • David Audretsch
  • Oliver Falck
  • Stephan Heblich
Open Access
Special Issue Paper


This paper combines the empirical finding of a functional specialization of cities with regional dynamics. We distinguish between cities dominated by headquarters and service firms (urban agglomerations), those with large stand-alone production plants in one sector (industrial agglomerations), and cities with integrated smaller firms (industrial districts). Based on German data, we find differing dynamics across these three city types. Cities that host basic research or integrated incumbents are more conducive to entrepreneurial activity, whereas the opposite is true of industrial agglomerations. Urban agglomerations dominated by headquarters with only administrative functions and the service sector are not very entrepreneur-friendly, either. However, although this type of city provides few externalities for startups in manufacturing, they could very well provide opportunities for service sector startups.

JEL Classification

O18 R11 R12 



We are indebted to the editor of the special issue, Andreas Stephan, two anonymous referees, and the participants of the summer meeting 2007 of the German speaking section of the Regional Science Association (GfR) for helpful comments on earlier versions of this paper.

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.


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Copyright information

© The Author(s) 2009

Authors and Affiliations

  • David Audretsch
    • 1
  • Oliver Falck
    • 2
  • Stephan Heblich
    • 3
  1. 1.Institute of Development StrategiesIndiana UniversityBloomingtonUSA
  2. 2.Ifo Institute for Economic Research and CESifoMunichGermany
  3. 3.Max Planck Institute of Economics, Group on Entrepreneurship, Public Policy and GrowthJenaGermany

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