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

Open Access
Special Issue Paper

Abstract

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 

Notes

Acknowledgments

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.

References

  1. Aarland K, Davis J, Henderson JV, Ono Y (2007) Spatial organization of firms: the decision to split production and administration. RAND J Econ 38(2): 480–494CrossRefGoogle Scholar
  2. Amin A, Thrift N (1992) Neo-Marshallian nodes in global networks. Int J Urban Reg Res 16: 571–587CrossRefGoogle Scholar
  3. Audretsch D (1995) Innovation and industry evolution. MIT Press, CambridgeGoogle Scholar
  4. Audretsch DB, Feldman MP (1996) Innovative clusters and the industry life-cycle. Rev Ind Organ 11: 253–273CrossRefGoogle Scholar
  5. Bade F-J, Laaser C-F, Soltwedel R (2003) Urban specialization in the internet age—empirical findings for Germany. Working Paper 1215, Kiel Institute of World EconomicsGoogle Scholar
  6. Bauernschuster S, Falck O, Heblich S (2008) Occupational choice and social contacts across regions. Jena Economic Research Papers 2008-079Google Scholar
  7. BBR (2006) ESPON ATLAS. Mapping the structure of the European territory. Bundesamt für Bauwesen und Raumordnung, BonnGoogle Scholar
  8. Becattini G (1979) Dal Settore Industriale al Distreto Industriale. Alcune consideración sull’unitá di indagine dell economía industriale. Revista di Economia e Politica Industriale 1: 1–8Google Scholar
  9. Becattini G (1990) The Marshallian industrial district as a socio-economic notion. In: Pyke F, Becattini G, Sengenberger W (eds) Industrial districts and inter-firm cooperation in Italy. International Institute for Labour Studies, Geneva, pp 37–51Google Scholar
  10. Best M (1990) The new competition: institutions of industrial restructuring. Harvard University Press, CambridgeGoogle Scholar
  11. Blundell R, Griffith R, Van Reenen J (1995) Dynamic count data models of technological innovation. Econ J 105: 333–344CrossRefGoogle Scholar
  12. Boente W, Heblich S, Falck O (2009) The impact of regional age structure on entrepreneurship. Econ Geogr 85: 269–287CrossRefGoogle Scholar
  13. Bramoullé Y, Kranton R (2007) Public goods in networks. J Econ Theory 135: 478–494CrossRefGoogle Scholar
  14. Brixy U, Fritsch M (2004) The establishment file of the German social insurance statistics. J Appl Social Sci Stud 124: 183–190Google Scholar
  15. Buenstorf G, Klepper S (2009) Heritage and agglomeration: the akron tire cluster revisited. Econ J 119: 705–733CrossRefGoogle Scholar
  16. Callois J-M, Aubert F (2007) Towards indicators of social capital for regional development issues: the case of french rural areas. Reg Stud 41(6): 809–821CrossRefGoogle Scholar
  17. Carlton DW (1983) The location and employment choices of new firms: an econometric model with discrete and continuous endogenous variables. Rev Econ Stat 65(3): 440–449CrossRefGoogle Scholar
  18. Chandler AD (1977) The visible hand: the managerial revolution in American business. Belknap, CambridgeGoogle Scholar
  19. Cohen W, Klepper S (1996) Firm size and the nature of innovation within industries: the case of process and product R&D. Rev Econ Stat 78: 232–243CrossRefGoogle Scholar
  20. Cooke P (1996) The new wave of regional innovation networks: analysis, characteristics and strategy. Small Bus Econ 8: 159–171CrossRefGoogle Scholar
  21. Davis JC, Henderson JV (2008) The agglomeration of headquarters. Reg Sci Urban Econ 38: 445–460CrossRefGoogle Scholar
  22. Duranton G, Puga D (2001) Nursery cities: urban diversity, process innovation, and the life cycle of products. Am Econ Rev 91: 1454–1477CrossRefGoogle Scholar
  23. Duranton G, Puga D (2005) From sectoral to functional urban specialization. J Urban Econ 57: 343–370CrossRefGoogle Scholar
  24. Falck O, Fritsch M, Heblich S (2008) The apple doesn’t fall far from the tree: location of start-ups relative to incumbents. CESifo Working Paper 2486Google Scholar
  25. Fallick B, Fleischman CA, Rebitzer JB (2006) Job-hopping in Silicon valley: some evidence concerning the microfoundations of a high-technology cluster. Rev Econ Stat 88: 472–481CrossRefGoogle Scholar
  26. Florida R (2002) Bohemia and Economic Geography. J Econ Geogr 2: 55–71CrossRefGoogle Scholar
  27. Fritsch M (2008) How does new business formation affect regional development? Introduction to the special issue. Small Bus Econ 30(1): 1–14CrossRefGoogle Scholar
  28. Fujita M, Krugman PR, Venables AJ (1999) The spatial economy—cities, regions, and international trade. MIT Press, Cambridge, http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=8555
  29. Glaeser E (2007) Entrepreneurship and the City, NBER Working Paper 13551Google Scholar
  30. Glaeser E, Kolko J, Saiz A (2001) Consumer city. J Econ Geogr 1: 27–50CrossRefGoogle Scholar
  31. Granovetter M (1985) Economic action and social structures: the problem of embeddedness. Am J Sociol 91: 481–510CrossRefGoogle Scholar
  32. Greene F, Mole K, Storey DJ (2008) Three decades of enterprise culture. Palgrave, LondonGoogle Scholar
  33. Griliches Z (1992) Patent statistics as economic indicator: a survey. J Econ Lit 28: 1661–1707Google Scholar
  34. Grotz R, Brixy U, Otto A (2002) Räumlicher Vergleich der Datengrundlagen zum Gründungs- und Stilllegungsgeschehen in Deutschland. In: Fritsch M, Grotz R (eds) Das Gründungsgeschehen in Deutschland. Physica, Heidelberg, pp 165–198Google Scholar
  35. Guimarães P, Figueiredo O, Woodward D (2000) A tractable approach to the firm location decision problem. Rev Econ Stat 85(1): 201–204CrossRefGoogle Scholar
  36. Hamermesh DS, Pfann GA (2003) Plant closings, learning and worker displacement. The Death of Fokker Aircraft, MimeoGoogle Scholar
  37. Henderson JV (1988) Urban development: theory, fact, and illusion. Oxford University Press, New YorkGoogle Scholar
  38. Henderson JV, Ono Y (2008) Where do manufacturing firms locate their headquarters? J Urban Econ 63: 431–450CrossRefGoogle Scholar
  39. Jacobs J (1969) The economy of cities. Random House, New YorkGoogle Scholar
  40. Jaffe A, Trajtenberg M, Henderson R (1993) Geographic localization of knowledge spillovers as evidenced by patent citations. Q J Econ 63: 577–598CrossRefGoogle Scholar
  41. Johansson M, Rauhut D (2006) ESPON Project 1.1.4. The spatial effects of demographic trends and migration. Swedish Institute for Growth Policy Studies (ITPS), StockholmGoogle Scholar
  42. Keeble D, Walker S (1994) New firms, small firms and dead firms: spatial patterns and determinants in the United Kingdom. Reg Stud 28: 411–427CrossRefGoogle Scholar
  43. Kim S (1999) The rise of multiunit firms in US manufacturing. Explorations Econ Hist 36(4): 360–386CrossRefGoogle Scholar
  44. Klepper S (2007) Disagreements, spinoffs, and the evolution of detroit as the capital of the U.S. automobile industry. Manage Sci 53: 616–631CrossRefGoogle Scholar
  45. Klepper S, Thompson P (2007) Spinoff entry in high-tech industries: motives and consequences. In: Malerba F, Brussoni S (eds) Economic perspectives on innovation. Cambridge University Press, Cambridge, pp 187–218CrossRefGoogle Scholar
  46. Krugman P (1991) Geography and trade. MIT Press, CambridgeGoogle Scholar
  47. Markusen A (1996) Sticky places in slippery space: a typology of industrial districts. Econ Geogr 72: 293–313CrossRefGoogle Scholar
  48. Marshall A (1920) Principles of economics, 8th edn. MacMillan, LondonGoogle Scholar
  49. Michelacci C, Silva O (2007) Why so many local entrepreneurs? Rev Econ Stat 89: 615–633CrossRefGoogle Scholar
  50. Nelson R, Winter S (1982) An evolutionary theory of economic change. Harvard University Press, CambridgeGoogle Scholar
  51. Ono Y (2003) Outsourcing business services and the role of central administrative offices. J Urban Econ 53: 377–395CrossRefGoogle Scholar
  52. Piore M, Sabel C (1984) The second industrial divide. Possibilities for prosperity. Basic Books Inc, New YorkGoogle Scholar
  53. Porter M (1990) The competitive advantage of nations. McMillan, LondonGoogle Scholar
  54. Rosenthal SS, Strange WC (2003) Geography, industrial organization, and agglomeration. Rev Econ Stat 85(2): 377–393CrossRefGoogle Scholar
  55. Sabel C (2002) Diversity, not specialization: the ties that bind the (new) industrial district. In: Curzio A, Fortis M (eds) Complexity and industrial clusters: dynamics and models in theory and practice. Physica, New York, pp 107–122Google Scholar
  56. Saxenian A (1994) Regional advantage: culture and competition in silicon valley and Rte, vol 128. Harvard University Press, CambridgeGoogle Scholar
  57. Saxenian A (1999) Silicon valley’s new immigrant entrepreneurs. Public Policy Institute of California, San FranciscoGoogle Scholar
  58. Schmalensee R (1977) Using the H-index of concentration with published data. Rev Econ Stat 59: 186–193CrossRefGoogle Scholar
  59. Stam E (2007) Why butterflies don’t leave. Locational behavior of entrepreneurial firms. Econ Geogr 83: 27–50CrossRefGoogle Scholar
  60. Stuart TE, Sorenson O (2005) Social networks and entrepreneurship. In: Alvarez S, Agarwal R, Sorenson O (eds) The handbook of entrepreneurship: disciplinary perspectives. Springer, Berlin, pp 211–228Google Scholar
  61. Venohr B, Meyer KE (2007) The German miracle keeps running: how Germany’s hidden champions stay ahead in the global economy. Working Paper 30, FHW BerlinGoogle Scholar
  62. Ward JH (1963) Hierarchical grouping to optimize an objective function. J Am Stat Assoc 58: 236–244CrossRefGoogle Scholar
  63. Winkelmann R (2008) Econometric analysis of count data. Springer, BerlinGoogle Scholar
  64. Womack J, Jones D, Roos D (1990) The machine that changed the world: the story of lean production. Rawson and Associates, New YorkGoogle Scholar

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

Personalised recommendations