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Creativity and entrepreneurship a regional analysis of new firm

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Regional Studies , Vol. 38.8, pp. 879–891, November 2004
Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation
S A M YO U L L E E * , R I C H A R D F L O R I DA * and Z O LTA N J. AC S † ‡ * Korea Information Strategy Development Institute, Juam-Dong, Kwachun, Kyunggi-Do 427-710, Korea and H. John Heinz III School of Public Policy and Management, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890, U S A. Emails: samyoul@andrew.cmu.edu; florida@andrew.cmu.edu Merrick School of Business, University of Baltimore, 1420 North Charles Street, B C 491, Baltimore, MD 21201, U S A. Email: zacs@ubalt.edu Max Planck Institute for Research into Economic Systems, Jena D-07745, Germany
(Received December 2003: in revised form April 2004) L  S. Y., F   R. and A  Z. J. (2004) Creativity and entrepreneurship: a regional analysis of new firm formation, Regional Studies 38 , 879–891. Understanding the factors that promote or mitigate new firm birth is crucial to regional economic development e orts, since a high level of new firm creation significantly contributes to regional economic vitality and is a major signal of a dynamic economy. The literature suggests that various factors such as unemployment, population density/ growth, industrial structure, human capital, the availability of financing and entrepreneurial characteristics significantly influence regional variation in new firm birth rates. This study explores whether connections exist among regional social characteristics, human capital and new firm formation. It argues that social diversity and creativity have a positive relationship with new firm formation. Building on the contributions of urbanist Jane Jacobs, Lee, Florida and Gates (2002) showed that social diversity and human capital have positive and significant relationships with regional innovation production measured by per capita patent production. While it is well known that regional human capital stock positively a ects new firm formation rates, little attention has been paid to the interaction among social diversity, human capital and entrepreneurship. It is argued that low barriers of entry into the regional labour market (as exhibited in part by the presence of a diverse population) and diverse culture facilitate the influx of a particular kind of human capital that promotes innovation and accelerates information flow, leading to the higher rate of new firm formation. The empirical results support the main hypothesis. By using Longitudinal Establishment and Enterprise Microdata (L E E M), the hypothesis is tested at the Metropolitan Statistical Areas (M S As) level as well as at the Labor Market Areas (L M As) level. New firm formation is strongly associated with cultural creativity when controlled for the variables suggested in the literature. Firm formation is positively and significantly associated with the Diversity Index but insignificantly with the Melting Pot Index. The results suggest that one needs to pay attention to the social habitat of a region to boost a regional entrepreneurial dynamics. Creativity New firm formation Entrepreneurship L  S. Y., F   R. et A  Z.J.(2004)Lacre´ativite´etlespritdentreprise:uneanalysere´gionaledelacr´eationdentreprise, Regional Studies 38 ,879891.Comprendrelesfacteursfavorablesoude´favorables`alacre´ationdentreprisejoueunroˆlecapital danslede´veloppemente´conomiquere´gional,parcequuntauxdecre´ation´elev´econtribuedefa¸contr`essignicativea`lavitalite´ e´conomique re´gionale et constitue un clignotant majeur d’une e´conomie dynamique. La documentation laisse supposer que diversfacteurs,telslechoˆmage,ladensit´e/lacroissancedelapopulation,lastructureindustrielle,lecapitalhumain,la disponibilite´ du financement, et les caracte´ristiques de l’esprit d’entreprise influencent sensiblement la variation re´gionale des tauxdecr´eationdentreprise.Cettee´tudecherche`aexaminersi,ouiounon,onpeute´tablirunecorre´lationentredes caract´eristiquessocialesre´gionales,lecapitalhumain,etlacre´ationdentreprise.Onsoutientqueladiversite´socialeetla cr´eativite´sontencorre´latione´troiteetsignicativeaveclacre´ationdentreprise.Lede´veloppementdescontributionsde l’urbaniste Jane Jacobs, Lee, Florida et Gates (2002) a de´montre´ que la diversit ´e sociale et le capital humain sont en corre lation ´ ´etroiteetsignicativeaveclinnovationre´gionale,mesure´eentermesdunombredebrevetsde´tenusparteˆte.Alorsquilest re¸cuquelestockducapitalhumaininuencedefac¸onpositivelestauxdecre´ationdentreprise,onpreˆtepeudattentiona` l’interaction entre la diversite´ sociale, le capital humain, et l’esprit d’entreprise. On soutient que les barrie`res a` l’insertion sur le marche´dutravailre´gionalpeue´lev´ees(cequilaissesupposerjusqua`uncertainpointlapre´sencedunepopulationdiverse)et une culture diverse facilitent l’a uxduncapitalhumainparticulie`rementpropice`alinnovationetquiacce´l`ereleux dinformation,cequiame`nea`untauxdecr´eationdentreprisepluse´lev´e.Lesr´esulatsempiriquesviennenta`lappuide lhypothe`seprincipalavance´.Apartirdesdonn´eeslongitudinalesetmicroe´conomiquessurlesentreprises(Longitudinal EstablishmentandEnterpriseMicrodataLEEM),oncherchea`testerlhypothe`sesurleplanm´etropolitain(Metropolitan Statistical Areas – M S As) ainsi qu’au niveau des marche´s du travail locaux (Labour Market Areas – L M As). Il s’ave`re que la cr´eationdentrepriseestencorre´latione´troiteaveclacr´eativit´eculturelle,unefoiscontroˆl´eepourlesvariablespropose´esdans 0034-3404 print/1360-0591 online/04/080879-13 ©2004 Regional Studies Association DOI: 10.1080/0034340042000280910 http://www.regional-studies-assoc.ac.uk