Cultural diversity and entrepreneurship: a regional analysis for Germany

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, 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 tends to dampen new firm foundation, cultural diversity has a positive impact on technology oriented start-ups. This suggests that the diversity of people is more conducive to entrepreneurship than the diversity of firms. Thus, regions characterized by a high level of knowledge and cultural diversity form an ideal breeding ground for technology oriented start-ups.

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Acknowledgments

We would like to thank participants of the international workshop on “Agglomeration and Growth in Knowledge-based Societies” at the Kiel Institute for helpful comments on an earlier version. We are particularly grateful to Rui Baptista, Eckhardt Bode and two anonymous referees for valuable comments and suggestions.

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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

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Audretsch, D., Dohse, D. & Niebuhr, A. Cultural diversity and entrepreneurship: a regional analysis for Germany. Ann Reg Sci 45, 55–85 (2010). https://doi.org/10.1007/s00168-009-0291-x

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JEL Classification

  • M13
  • O18
  • R11