Read more
New Business Formation and Regional Development provides an overview of the effects that new businesses have on regional development. The focus is on regions because geographical units of observation are much better suited for such an analysis than are industries. Regional growth is a complex process that involves large numbers of start-ups in diverse industries, firm exit, and growing and declining incumbent firms. The determinants of the effects that new business formation has in this complex process may be different from those factors that make individual start-ups succeed or a fail. After an introductory explanation, section 2 begins with a brief sketch of the extant research on this topic. Section 3 reviews the main theoretical approaches that provide insights and explanations, and combines them in a more diverse and comprehensive explanation of the effects of start-ups on development. This eclectic approach particularly highlights the competitive challenge that start-ups pose to incumbent firms and the important role played by the regional environment. Section 4 reports the available empirical evidence on the different effects that new business formation might have on regional development. The research ends with a discussion of policy implications in Section 5, and outlining important questions for further research in Section 6.
