Abstract
This paper contributes to the literatures on entrepreneurship and economic geography by investigating the effects of clusters on the survival and performance of new entrepreneurial firms where clusters are defined as regional agglomerations of related industries. We analyze firm-level data for all 4,397 Swedish firms started in the telecom and consumer electronics, financial services, information technology, medical equipment, and pharmaceuticals and pharmaceutical sectors from 1993 to 2002. We find that that firms located in strong clusters create more jobs, higher tax payments, and higher wages to employees. These effects are consistent for absolute agglomeration measures (firm or employee counts), but weaker for relative agglomeration measures (location quotients). The strengths of the effects are found to vary depending on which geographical aggregation level is chosen for the agglomeration measure.
Similar content being viewed by others
Notes
Labor market areas are statistically defined regions used primarily to investigate regional flows of goods, workers, and production. Counties are administrative regions responsible for governmental issues such as taxation and health care. In comparison to federal nations like Germany or the US, Swedish counties have limited political independence. Counties combine to form NUTS-2 regions, which are statistical units used by the European Union to allow for the comparisons of regions of similar geography and population.
In unreported models we also include the lagged dependent variables to account for the endogenous nature of organic growth. The presence of this variable, however, made estimates with firm fixed effects unstable, and we excluded the lagged dependent variable in the final model. We are grateful to an anonymous reviewer for pointing out this problem.
References
Amiti, M. (1999). Specialization patterns in Europe. Weltwirtschaftliches Archiv, 135, 573–593.
Audretsch, D. B. (1995). Innovation and industry evolution. London: MIT Press.
Audretsch, D. B., & Feldman, M. (1996). R&D spillovers and the geography of innovation and production. American Economic Review, 86, 630–640.
Audretsch, D. B., & Lehmann, E. (2005). Does the knowledge spillover theory of entrepreneurship hold for regions? Research Policy, 34, 1191–1202.
Baptista, R., & Swann, P. (1999). A comparison of clustering dynamics in the US and UK computer industries. Journal of Evolutionary Economics, 9, 373–399.
Beaudry, C., & Breschi, S. (2003). Are firms in clusters really more innovative? Economics of Innovation and New Technology, 12, 325–342.
Beaudry, C., & Swann, P. (2001). Growth in industrial clusters: A bird’s eye view of the United Kingdom. Discussion Paper 00–38, Stanford Institute for Economic Policy Research.
Becchetti, L., De Panizza, A., & Oropallo, F. (2007). Role of industrial district externalities in export and value-added performance: Evidence from the population of Italian firms. Regional Studies, 41, 601–621.
Blossfeld, H. P., & Rohwer, G. (1995). Techniques of event history analysis: New approaches to causal analysis. Mahwah, New Jersey: Lawrence Erlbaum Associates.
Braunerhjelm, P., & Borgman, B. (2004). Geographical concentration, entrepreneurship and regional growth: Evidence from regional data in Sweden, 1975–99. Regional Studies, 38, 929–947.
Braunerhjelm, P., & Carlsson, B. (1999). Industry clusters in Ohio and Sweden, 1975–1995. Small Business Economics, 12, 279–293.
de Blasio, G., & Di Addario, S. (2005). Do workers benefit from industrial agglomeration? Journal of Regional Science, 45, 797–827.
Delmar, F., Hellerstedt, K., & Wennberg, K. (2006). The evolution of firms created by the science and technology labor force in Sweden 1990–2000. In J. Ulhöi & P. R. Christensen (Eds.), Managing complexity and change in SMEs: Frontiers in European research (pp. 69–102). Cheltenham: Edward Elgar.
Drukker, D. M. (2003). Testing for serial correlation in linear panel-data models. Stata Journal, 3(2), 168–177.
Dumais, G., Ellison, G., & Glaeser, E. (2002). Geographic concentration as a dynamic process. Review of Economics and Statistics, 84(2), 193–204.
European Commission. (2003). Thematic report: Cluster policies, European trend chart on innovation. Brussels: Enterprise Directorate-General.
Feldman, M. (2003). The locational dynamics of the US biotech industry: Knowledge externalities and the anchor hypothesis. Industry and Innovation, 10, 311–328.
Feldman, M., & Audretsch, D. (1999). Innovation in cities: Science-based diversity, specialization and localized competition. European Economic Review, 43, 409–429.
Folta, T. B., Cooper, A. C., & Baik, Y. S. (2006). Geographic cluster size and firm performance. Journal of Business Venturing, 21, 217–242.
Fotopoulos, G., & Louri, H. (2000). Location and survival of new entry. Small Business Economics, 14, 311–321.
Fritsch, M., & Mueller, P. (2008). The effect of new business formation on regional development over time: The case of Germany. Small Business Economics, 30, 15–29.
Fritsch, M., & Slavtchev, V. (2007). Universities and innovation in space. Industry & Innovation, 14, 201–218.
Gilbert, B. A., McDougall, P. P., & Audretsch, D. B. (2008). Clusters, knowledge spillovers and new venture performance: An empirical examination. Journal of Business Venturing, 23, 405–422.
Gimeno, J., Folta, T., Cooper, A., & Woo, C. (1997). Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42, 750–783.
Glaeser, E., Kallal, H., Scheinkman, J., & Shleifer, A. (1992). Growth in cities. Journal of Political Economy, 100, 1126–1152.
Globerman, S., Shapiro, D., & Vining, A. (2005). Clusters and intercluster spillovers: Their influence on the growth and survival of Canadian information technology firms. Industrial and Corporate Change, 14, 27–60.
Hart, M., & Hanvey, E. (1995). Job generation and new and small firms: Some evidence from the late 1980s. Small Business Economics, 7, 97–109.
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46, 1251–1271.
Karlsson, C. (1997). Product development, innovation networks, and agglomeration economies. Annals of Regional Science, 31, 235–258.
Ketels, C., Lindqvist, G., & Sölvell, Ö. (2006). Cluster initiatives in develo** and transition economies. Stockholm: Center for Strategy and Competitiveness Stockholm School of Economics.
Krugman, P. (1991). Geography and trade. Cambridge, MA: MIT Press.
Lee, L. (1983). Generalized econometric models with selectivity. Econometrica, 51, 507–512.
Lindqvist, G., Malmberg, A., & Sölvell, Ö. (2003). Svenska klusterkartor. Uppsala: CIND, Uppsala University.
Malmberg, A., Sölvell, Ö., & Zander, I. (1996). Spatial clustering, local accumulation of knowledge and firm competitiveness. Geografiska annaler, 78B, 85–97.
Marshall, A. (1920). Principles of economics. London: Macmillan.
Mata, J., & Portugal, P. (2002). The survival of new domestic and foreign-owned firms. Strategic Management Journal, 24, 323–343.
Midelfart-Knarvik, K. H., Overman, H. G., Redding, S., & Venables, A. J. (2000). The location of European industry, Economic Papers no. 142: Directorate General for Economic and Financial Affairs, European Commission.
Nicolini, R. (2001). Size and performance of local cluster of firms. Small Business Economics, 17, 185–195.
Pe’er, A., & Vertinsky, I. (2006). The determinants of survival of de novo entrants in clusters and dispersal. Working paper: Darthmouth College, Tuck School of Business.
Porter, M. E. (1990). The competitive advantage of nations. New York: The Free Press.
Porter, M. E. (1998). On competition. Boston: HBS Press.
Porter, M. E. (2003). The economic performance of regions. Regional Studies, 37, 549–578.
Prevezer, M. (1997). The dynamics of industrial clustering in biotechnology. Small Business Economics, 9, 255–271.
Reynolds, P. D., Miller, B., & Maki, W. R. (1995). Explaining regional variation in business births, deaths U.S. 1976–1988. Small Business Economics, 7, 389–407.
Rocha, H. (2004). Entrepreneurship and development: The role of clusters. Small Business Economics, 23, 363–400.
Rocha, H., & Sternberg, R. (2005). Entrepreneurship: The role of clusters - theoretical perspectives and empirical evidence from Germany. Small Business Economics, 24, 267–292.
Rosenthal, S. S., & Strange, W. C. (2001). The determinants of agglomeration. Journal of Urban Economics, 50, 191–229.
Rosenthal, S. S., & Strange, W. C. (2004). Evidence on the nature and sources of agglomeration economies. In J. V. Henderson & J. F. Thisse (Eds.), Handbook of regional and urban economics, (Vol. 4, pp. 2119–2171) Amsterdam: North-Holland.
Rosenthal, S. S., & Strange, W. C. (2005). The geography of entrepreneurship in the New York metropolitan area. Federal Reserve Bank of New York Economic Policy Review, 11, 29–53.
Saxenian, A. (1985). The genesis of Silicon Valley. In P. Hall & A. Markusen (Eds.), Silicon landscapes (pp. 20–34). Boston: Allen & Unwin.
Scherer, F. M. (1982). Inter-industry technology flows and productivity growth. The Review of Economics and Statistics, 64, 627–634.
Sölvell, Ö., Lindqvist, G., & Ketels, C. (2003). The cluster initiative greenbook. Stockholm: Ivory Tower.
Sørensen, O., & Audia, P. G. (2000). The social structure of entrepreneurial activity: Geographic concentration of footwear production in the United States, 1940–1989. American Journal of Sociology, 106, 424–462.
Sørensen, J., & Sorenson, O. (2003). From conception to birth: Opportunity perception and resource mobilization in entrepreneurship. In J. Baum (Ed.), Advances in Strategic Management, (Vol. 20, pp. 71–99).
Storper, M. (1997). The regional world. New York: Guilford.
Stough, R. R., Haynes, K. E., & Campbell, H. S. (1998). Small business entrepreneurship in the high technology services sector: An assessment for the edge cities of the U.S. national capital region. Small Business Economics, 10, 61–74.
Stuart, C. (1979). Search and spatial organization of trading. In S. Lippman & J. McCall (Eds.), Studies in the economics of search (pp. 17–34). Amsterdam: North-Holland.
van Oort, F.G., & Stam, E. (2006). Agglomeration economies and entrepreneurship in the ICT industry. Working paper: Erasmus School of Economics.
von Thünen, J. (1826). Der isolierte staat in Beziehung auf Landwirtschaft und nationalökonomie. Hamburg, Germany: Penthes.
Weber, A. (1909). Über den standort der industrien. Türingen, Germany: Mohr Verlag.
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge, MA: The MIT Press.
Acknowledgements
We are grateful for critical comments from Michael Dahl, Olav Sorenson, Tim Folta, Johan Wiklund, Rene Belderbos, Örjan Sölvell, Ulli Meyer, Dirk Fornahl, and seminar participants and the 2007 Uddevalla Symposium. Financial support was provided by Handelsbanken Research Foundations, the Swedish Agency for Innovation Systems (Vinnova), the Swedish Foundation for Small Business Research (FSF), and the Swedish National Board for Industrial and Technological Development (NUTEK). The usual caveats apply.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Wennberg, K., Lindqvist, G. The effect of clusters on the survival and performance of new firms. Small Bus Econ 34, 221–241 (2010). https://doi.org/10.1007/s11187-008-9123-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-008-9123-0