Clusters and Entrepreneurship

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Provided by: Harvard University
Topic: SMBs
Format: PDF
This paper examines the role of regional clusters in regional entrepreneurship. The authors focus on the distinct influences of convergence and agglomeration on growth in the number of start-up firms as well as in employment in these new firms in a given region-industry. While reversion to the mean and diminishing returns to entrepreneurship at the region-industry level can result in a convergence effect, the presence of complementary economic activity creates externalities that enhance incentives and reduce barriers for new business creation. Clusters are a particularly important way through which location-based complementarities are realized.
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