Abstract
For rapidly urbanizing countries in Asia, entrepreneurial activity is a critical source of employment and economic development. This paper uses a panel dataset of 20 countries in Asia to examine the role of urbanization in moderating the process of knowledge spillovers leading to firm creation. It is one of the pioneering studies to examine whether the knowledge spillover theory of entrepreneurship (KSTE)—a prominent and empirically valid theory in Western economies—is also valid in Asian economies. Empirical analysis reveals that the extent and quality of urbanization plays an important moderating role that can enhance or retard the exploitation of knowledge by urban entrepreneurs. The paper has important policy implications for Asian countries to take advantage of rapid urbanization and make investments in research and development to create knowledge spillovers that promote firm creation.
Plain English Summary
This study finds that a confluence of investment in research and development and the quality of urbanization in Asian countries boost firm creation. Moreover, employment in financial and business services helps in the creation and exchange of useful knowledge for entrepreneurial activities. This workforce acquires and generates knowledge to resolve challenges in business through interactions with multiple firms. It is important to understand the factors leading to a higher level of firm creation because the entry of new firms is one of the key sources of job creation and innovation. The principal implication of this study is that the countries should make investments in research and development and improve the quality and extent of urbanization to spur entrepreneurship.
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Notes
PCA is a multivariate statistical weighting approach that converts possible correlated variables to a linear combination of uncorrelated variables called principal components. The first component explains most variation in the data while last component explains least PCA constructs an index of weighted factor score on the basis of factors that will then rank the countries. This technique is helpful in recognizing the most important variables from a list of many variables to be used in the analysis. Moreover, in PCA, weights are not assigned arbitrarily but are directed by the data.
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Iftikhar, M.N., Justice, J.B. & Audretsch, D.B. The knowledge spillover theory of entrepreneurship: an Asian perspective. Small Bus Econ 59, 1401–1426 (2022). https://doi.org/10.1007/s11187-021-00577-3
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DOI: https://doi.org/10.1007/s11187-021-00577-3