Skip to main content
Download PDF

Growth of new firms and spatially bounded knowledge externalities

The Annals of Regional Science volume 46, pages 495–518 (2011)Cite this article

Abstract

If localized knowledge spillovers are important, new firms will tend to locate in proximity of one another, as well as other knowledge sources, in order to capitalize on external knowledge stocks. Although theories that emphasize knowledge spillovers thus present the urban and regional character of a firm’s proximity to knowledge sources as a stylized fact, the microfoundations of economic growth in agglomerations are among the most anticipated issues in urban economic research. In this paper, we define knowledge-intensive environments along several dimensions, and analyze new firms’ survival and growth at the individual level. We apply multilevel regression to avoid potential estimation biases, and use firm-level data for newly established manufacturing and business services firms over the period of 2001–2006 in the Netherlands. We find that the urban knowledge context significantly relates to firm-level employment growth, but that this is conditioned by heterogeneous features of the firm population and knowledge externalities, including (a) industries—more in services than in manufacturing; (b) types of knowledge context—more positively related to (non-technical) innovation than to (technologically) R&D related variables; and (c) types of post entry process—different for survival and growth. We also find significant interaction effects between the growth of R&D-specialized firms with university presence.

References

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

    Article  Google Scholar 

  • Acs ZJ, Audretsch DB, Braunerhjelm P, Carlsson B (2004) ‘The missing link’: the knowledge filter and entrepreneurship in economic growth. CEPR working paper 4358

  • Aghion P, Blundell R, Griffith R, Howard P, Prantl S (2008) Entry, innovation, and growth: theory and evidence. Rev Econ Stat (forthcoming)

  • Audretsch DB, Mahmood T (1994) Entry, growth, and survival: the new learning on firm selection and industry evolution. In: Aiginger K, Finsinger J (eds) Applied industrial organization: towards a theory based on empirical industrial organization. Kluwer, Dordrecht, pp 85–93

    Google Scholar 

  • Audretsch DB (1995) Innovation, growth and survival. Int J Ind Organ 13: 441–457

    Article  Google Scholar 

  • Audretsch DB, Mata J (1995) The post-entry performance of firms: introduction. Int J Ind Organ 13: 413–419

    Article  Google Scholar 

  • Audretsch DB, Lehmann EE (2005a) Mansfield’s missing link: the impact of knowledge spillovers on firm growth. J Technol Transf 30: 207–210

    Article  Google Scholar 

  • Audretsch DB, Lehmann EE (2005b) Does the knowledge spillover theory of entrepreneurship hold for regions?. Res Policy 34: 1191–1202

    Article  Google Scholar 

  • Audretsch DB, Keilbach MC, Lehmann EE (2006) Entrepreneurship and economic growth. Oxford University Press, Oxford

    Book  Google Scholar 

  • Audretsch DB, Dohse D (2007) Location: a neglected determinant of firm growth. Rev World Econ 143: 79–107

    Article  Google Scholar 

  • Audretsch DB, Keilbach M (2007) The theory of knowledge spillover entrepreneurship. J Manag Stud 44(7): 1242–1254

    Article  Google Scholar 

  • Bettencourt L, Lobo J, Strumsky D (2007) Invention in the city: increasing returns to patenting as a scaling function of metropolitan size. Res Policy 36: 107–120

    Article  Google Scholar 

  • Beugelsdijk S (2007) The regional environment and a firm’s innovative performance: a plea for a multilevel interactionist approach. Econ Geogr 83: 181–199

    Article  Google Scholar 

  • Black G (2004) The geography of small firm innovation. Kluwer, Dordrecht

    Google Scholar 

  • Bosma N, van Stel A, Suddle K (2006) The geography of new firm formation: evidence from independent start-ups and new subsidiaries in the Netherlands. EIM: Zoetermeer

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

    Article  Google Scholar 

  • Brouwer E, Kleinknecht A, Reijnen JON (1993) Employment growth and innovation at the firm level. J Evol Econ 2: 153–159

    Article  Google Scholar 

  • Bullen N, Jones K, Duncan C (1997) Modelling complexity: analyzing between-individual and between-place variation—a multilevel tutorial. Environ Planning A 29(4): 585–609

    Article  Google Scholar 

  • Burger M, Raspe O, Van Oort F (2008) Agglomeration economies and firm performance: a mixed hierarchical and cross-classified model. Paper prepared for the 3rd Dutch-Israel RSA workshop, Jeruzalem

  • Carlino G, Chatterjee S, Hunt R (2007) Urban density and the rate of invention. J Urban Econ 61: 389–419

    Article  Google Scholar 

  • Caroll GR, Hannan MT (2000) The demography of corporations and industries. Princeton University Press, Princeton

    Google Scholar 

  • Cortright J, Mayer H (2001) High-tech specialization: a comparison of high-tech centers. The Brookings Survey paper, pp 1–18

  • Devereux MP, Griffith R, Simpson H (2007) Firm location decisions, regional grants and agglomeration externalities. J Public Econ 91: 413–435

    Article  Google Scholar 

  • Döring T, Schnellenbach J (2006) What do we know about geographical knowledge spillovers and regional growth? A survey of the literature. Reg Stud 40: 375–395

    Article  Google Scholar 

  • Duranton G, Puga D (2004) Micro-foundations of urban agglomeration economies. In: Henderson JV, Thisse JF (eds) Handbook of Regional and Urban Economics, edition 1:4: 2063–2117. Elsevier

  • Esteve-Pérez S, Manez-Castillejo JA (2008) The resource-based theory of the firm and firm survival. Small Bus Econ 30: 231–249

    Article  Google Scholar 

  • Feldman MP, Audretsch DB (1999) Innovation in cities: science-based diversity, specialization and localized competition. Eur Econ Rev 43: 409–429

    Article  Google Scholar 

  • Florax RJGM, Folmer H (1992) Knowledge impacts of universities on industry: an aggregate simultaneous investment model. J Reg Sci 32: 437–466

    Article  Google Scholar 

  • Fritsch M (2004) Cooperation and the efficiency of regional R&D activities. Camb J Econ 28: 829–846

    Article  Google Scholar 

  • Geroski PA (1995) What do we know about entry?. Int J Ind Organ 13: 421–440

    Article  Google Scholar 

  • Glaeser EL, Kallal HD, Scheinkman JA, Shleifer 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

    Article  Google Scholar 

  • Goldstein H (2003) Multilevel statistical models, 3rd edn. Arnold, London

    Google Scholar 

  • Gordon IR, McCann P (2000) Industrial clusters: complexes, agglomeration and/or social networks?. Urban Stud 37(3): 513–532

    Article  Google Scholar 

  • Grosmann GM, Helpman E (1991) Trade, knowledge spillovers, and growth. Eur Econ Rev 35: 517–526

    Article  Google Scholar 

  • Harrison B, Kelley MR, Gant J (1996) Innovative firm behavior and local milieu: exploring the intersection of agglomeration, firm effects, and technological change. Econ Geogr 72: 233–258

    Article  Google Scholar 

  • Heckman JJ (1976) The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models. Ann Econ Soc Meas 5: 475–492

    Google Scholar 

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

    Article  Google Scholar 

  • Henderson JV (2007) Understanding knowledge spillovers. Reg Sci Urban Econ 37: 497–508

    Article  Google Scholar 

  • Hox JJ (2002) Multilevel analysis: techniques and Applications. Erlbaum, Mahwah

    Google Scholar 

  • Illeris S (1996) The service economy: a geographical approach. Wiley, Chichester

    Google Scholar 

  • Knoben J (2008) Localized inter-organizational linkages, agglomeration effects, and the innovative performance of firms. Ann Reg Sci (forthcoming)

  • Koo J (2005) Agglomeration and spillovers in a simultaneous framework. Ann Reg Sci 39: 35–37

    Article  Google Scholar 

  • Kreft IGG, de Leeuw J (2004) Introducing multilevel modelling. Sage, London

    Google Scholar 

  • Lucas RE (1988) On the mechanism of economic development. J Monet Econ XXII: 3–42

    Article  Google Scholar 

  • Lucas RE (1993) Making a miracle. Econometrica 61: 251–272

    Article  Google Scholar 

  • Malmberg A, Malmberg B, Lundequist P (2000) Agglomeration and firm performance: economies of scale, localisation, and urbanisation among Swedish export firms. Environment and Planning A

  • Maskell P (2001) The firm in economic geography. Econ Geogr 77: 329–344

    Article  Google Scholar 

  • Mathur VK (1999) Human-capital-based strategy for regional economic development. Econ Dev Q XIII: 203–216

    Article  Google Scholar 

  • Miles I, Kastrinos N, Flanagan K, Bilderbeek R, den Hertog P, Huntink W, Bouman M (1995) Knowledge intensive business services: their roles as users, carriers and sources of innovation. Report to DG13 SPRINT-EIMS, PREST, Manchester, March

  • Muller E, Zenker A (2001) Business services as actors of knowledge transformation: the role of KIBS in regional and national innovation systems. Res Policy 30: 1501–1516

    Article  Google Scholar 

  • OECD : (2003) Science, technology and industry scoreboard. OECD, Paris

    Book  Google Scholar 

  • Parker SC (2005) The economics of entrepreneurship: what we know and what we don’t. Found Trends Technol Inf Oper Manag 1: 1–54

    Google Scholar 

  • Raspe O, van Oort FG (2006) The knowledge economy and urban economic growth. Eur Plan Stud 14: 1209–1234

    Article  Google Scholar 

  • Raspe O, van Oort FG (2008) Firm growth and localized knowledge externalities. J Reg Anal Policy 38(2): 100–116

    Google Scholar 

  • Raudenbusch SW, Bruyk AS (2002) Hierarchical linear models. Sage, Newbury Park

    Google Scholar 

  • Romer PM (1986) Increasing returns and long-run growth. J Polit Econ 94: 1002–1037

    Article  Google Scholar 

  • Rosenthal SS, Strange WC (2003) Geography, industrial organization, and agglomeration. Rev Econ Stat 85: 377–393

    Article  Google Scholar 

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

    Article  Google Scholar 

  • Saviotti PP, Pyka A (2004) Economic development by the creation of new sectors. J Evol Econ 14: 1–35

    Article  Google Scholar 

  • Scott AJ (1995) The geographical foundations of industrial performance. Compet Change 1: 51–66

    Google Scholar 

  • Sena V (2004) Total factor productivity and the spillover hypothesis: some new evidence. Int J Prod Econ 92: 31–42

    Article  Google Scholar 

  • Sorenson O, Audia PG (2000) The social structure of entrepreneurial activity: geographic concentration of footwear production in the United States, 1940–1989. Am J Sociol 106(2): 424–462

    Article  Google Scholar 

  • Stam E (2007) Entrepreneurship and innovation. In: Nooteboom B (ed) Micro-foundations for innovation policy. The Hague, WRR

  • Sternberg R, Arndt O (2001) The firm or the region. What determines the innovation behaviour of European firms?. Econ Geogr 77: 364–382

    Article  Google Scholar 

  • Stuart T, Sorenson O (2003) The geography of opportunity: spatial heterogeneity in founding rates and the performance of biotechnology firms. Res Policy 32: 229–253

    Article  Google Scholar 

  • Taylor M, Asheim B (2001) The concept of the firm in economic geography. Econ Geogr 77: 315–328

    Article  Google Scholar 

  • Teece DJ (1986) Profiting from technological innovation: implications for integration, collaboration, licensing and public policy. Res Policy 15: 285–305

    Article  Google Scholar 

  • Van Oort FG (2004) Urban growth and innovation; spatially bounded externalities in the Netherlands. Aldershot, Ashgate

    Google Scholar 

  • Van Oort FG, Atzema OALC (2004) On the conceptualization of agglomeration economies: the case of new firm formation in the Dutch ICT sector. Ann Reg Sci 38: 1–28

    Article  Google Scholar 

  • Varga A (2000) Local academic knowledge transfers and the concentration of economic activity. J Reg Sci 40(2): 289–309

    Article  Google Scholar 

  • Weterings A, Koster S (2007) Inheriting knowledge and sustaining relationships: What stimulates the innovative performance of small software firms in the Netherlands?. Res Policy 36(3): 320–335

    Article  Google Scholar 

Download references

Acknowledgments

The authors thank Joris Knoben and Erik Stam and two anonymous referees for their comments on an earlier version 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.

Author information

Affiliations

  1. Urban and Regional Research Centre Utrecht (URU), Faculty of Geosciences, Utrecht University, P.O. Box 80115, 3508 TC, Utrecht, The Netherlands

    Otto Raspe

  2. Netherlands Environmental Assessment Agency (PBL), P.O. Box 30314, 2500 GH, The Hague, The Netherlands

    Frank van Oort

Authors
  1. Otto Raspe
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Frank van Oort
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Frank van Oort.

Rights and permissions

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.

Reprints and Permissions

About this article

Cite this article

Raspe, O., van Oort, F. Growth of new firms and spatially bounded knowledge externalities. Ann Reg Sci 46, 495–518 (2011). https://doi.org/10.1007/s00168-009-0357-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00168-009-0357-9

JEL Classification

  • C21
  • O18
  • R11
  • R30