Incubating an Illusion? Long‐Term Incubator Firm Performance after Graduation

Local economic development policies worldwide perceive business incubation as an effective measure to promote regional growth through the support of young and innovative ventures. The common assumption is that incubation promotes firm growth, in particular after these firms graduated from their incubator organisations. However, knowledge regarding the performance of incubated ventures after they have (successfully) completed their incubation is almost non‐existent. This article investigates the long‐term development of 324 graduate firms from five German business incubators (incubated between 1990 and 2006). The present study does not suffer from a survivor bias, meaning that performance data of non‐surviving firms is also included. Using employment and sales measures as performance indicators, this study contradicts existing results with regard to long‐term graduate performance. Findings of this paper do not support the presumption of sustainable and strong firm growth beyond incubation.     

Firm Demography and Regional Development: Evidence from Italy

This article contributes to the literature on firm demography and regional development in at least three different ways. First, consumption, rather than employment, which is the most common variable seen in literature, is used to measure the impact of firm demography on regional development. Second, while the literature is mainly focused on the relationship between new business formation and regional development, we investigate both entry and exit flows of firms. Third, we decompose each of these flows into spatial and sectoral components. The empirical investigation looks at the Italian regions with reference to the period 2004–2009. Results seem to be substantially divergent between the South and the rest of Italy.     

Who leads regional industrial dynamics? “New industry creators” in Chinese regions

Recent evolutionary economic geography studies have argued that regional diversification emerges as a path‐dependent process, as regions often branch into industries that are related to its industrial structure. However, it is less clear who are creating new industries and under what regional conditions. This research seeks to fill this gap and identify “new industry creators” in regional industrial diversification. We differentiate two types of new industry formation—path‐breaking and path‐dependent—and examine whether some new industry creators are more path‐breaking than others, by incorporating two factors that have been largely overlooked in recent literature on technological relatedness—firm heterogeneity and regional institutions. Based on a firm‐level data set of China’s manufacturing industries, this paper shows that path‐breaking and path‐dependence coexist. Empirical results confirm that firm heterogeneity and regional institutions not only affect the firms’ capabilities in creating new industries, but also encourage/discourage firms to be adventurous and path‐breaking. This research implies that lagging regions can catch up with developed regions by coordinating regional resources and adjusting local institutional arrangements to attract more path‐breaking firms.     

Employment Growth by Firm Size During the Recent Crisis in Italy: A Multifactor Partitioning Analysis

The effects on employment growth in firms, grouped by size class, of the economic crisis that began in 2008 are analysed using multifactor partitioning (MFP). Italy's employment growth is decomposed into four explanatory factors: the stage in the business cycle; the effect of firm size; industry composition; and regional distribution; together with the interactions among these four effects. The interpretation of these effects is facilitated by the introduction within the MFP framework of a new decomposition of several key elements. The results show that the adopted approach and the suggested decompositions are useful to study the effect of size on employment change. This effect is found to be negative only for micro units (with less than 10 employees). For the other classes, it is positive. The observed negative changes in these classes are mainly due to the business cycle and an unfavourable industrial composition.     

Firm employment growth in China: The role of marketization and regional economic factors

Very heterogeneous patterns of firm employment growth characterize the Chinese provinces, suggesting the existence of a relationship between these and regional factors. This empirical work explores this topic by providing novel evidence of the role played by regional institutional and regional factors in firm employment growth in China during the decade 1998–2007, an important period in the Chinese transition towards a market economy. The results show that controlling for the internal determinants of firm performance, the firms located in provinces converging faster towards a market economy, exhibiting relatively better patterns (in terms of agglomeration, endowment of human capital, innovation and environmental protection) tend to expand their employment relatively more. These findings confirm the existence of a macro–micro-connection as to what firm heterogeneity is concerned, as they reveal a differential growth channel along the regional dimension. In particular, local progress in government–market relationships appears as the most relevant dimension of marketization process. Given the regionally decentralized institutional system in China and considering its process of transformation, these findings inform local authorities concerned with the promotion of regional employment.     

Regional Variations of Firm Births,Deaths and Growth Patterns in the UK, 1980–1991

One of the debates around new firm formation across sub‐national territories focuses on whether regional differences in industrial structure are more important influences than regional differences in individual industry performance. The present research, using Value Added Tax (VAT) registration data, attempts to make a contribution to this debate in the United Kingdom (UK) context using a shift‐share covariance model. Firm de‐registrations and, as a consequence, net changes in firm stocks are also analyzed with similar questions in mind. The findings show that although the effects of industrial mix are significant across most regions, in several key regional contexts the industrial competitive effect dominates. The issue of the role of regional industrial concentration forms a second major theme of this paper. This basically involves a questioning as to whether concentration is a positive or negative force for new firm formation. The results of this research indicate that industrial concentration, measured through localization, is more important for firm deaths than for firm births (although significant for both), but not particularly relevant to the understanding of the net outcome of entry and exit processes. In the UK, regions with higher levels of industry concentration seem to be associated overall with relatively lower levels of both firm births and deaths.     

Shift‐Share Analysis and Changes in Japanese Manufacturing Employment

Shift‐share analysis is used to examine the role of spatial structure on changes in regional manufacturing employment, in contrast to the traditional focus of shift‐share studies on the role of industrial structure. It is argued that changes in a region's space‐economy can be understood not only in terms of the economic subdivisions of the region but also in terms of the contribution of its spatial subdivisions. The latter is illustrated by means of a case study of the contribution of different types of local area to changes in regional manufacturing employment in Japan. Each region was subdivided into four types of local area based on population density. The analysis covered the period from 1981 to 1995, a time of major transformation in Japan's space‐economy. The shift‐share model was also used to estimate the impact of local area output and productivity on changes in regional employment. In general, the results show that there was a progressive underdevelopment of the core regions, associated with falling output and productivity. The country's peripheral regions were characterized by development, associated with rising output and productivity. Atthe local scale, however, the picture is far more complex. Types of local area contributed to regional employment change in very different ways, with respect to both time, region, and output/productivity. The contribution of local spatial structure to the regional space‐economy of Japan is fundamentally fragmented and uneven.     

The Role of Pre‐Entry Experience of Firm Founders in Peripheral Regions: Routines,Business Contacts,and Local Starting Conditions

This paper investigates how spinoffs in peripheral regions can profit from the work experience of their founders. More specifically, it discusses which firm routines and business contacts entrepreneurs gather through their prior work experience, and how this experience influences the organizational structure and orientation of the newly founded firm. The transfer of capabilities from parent firm to spinoff has been identified as important aspect of industrial clustering, but empirical evidence from peripheral areas is still sparse. It compares 22 semi‐structured interviews with founders of manufacturing firms from different peripheral regions in Switzerland to investigate whether routine and network transfer differs in varying peripheral contexts. The results show that not only inherited routines are important, but also inherited business contacts. Further, instead of simply reproducing acquired routines and networks, founders employ a mixture of continuity and change to find a good trade‐off between relying on well‐proven practices and introducing novelty. Finally, the geographical proximity of inherited business contacts seems to have an influence on the implementation strategy founders choose. Entrepreneurs with strong inherited local business contacts do not have to invest as much in building up new business contacts as those entrepreneurs in more isolated locations.     

Location and the Innovation Performance of Commercial GIS Companies

This paper looks at the role of firm size, location, and in‐house research and development (R&D) in the innovation performance of U.S. firms in the commercial geographic information systems (GIS) industry. Data from a survey of 300 GIS firms are presented. The results suggest that innovation‐intensity varies directly with in‐house R&D spending (scaled as a proportion of company sales), but inversely with company size (total employment). Significant regional variations in the innovation performance of GIS firms are identified. It is argued that the geography of innovation is influenced by the spatial distribution of young and/or small firms, in that R&D‐productivity is found to vary inversely with company size. An important finding is that creative inputs to support innovation are almost evenly divided between internal and external sources. A surprising result is that the academic community is not viewed as a particularly important source of new ideas for innovative firms. The paper concludes with a discussion of the implications of the survey data for future empirical work on the GIS sector.     

Revisiting the Roles of the University in Regional Economic Development: A Triangulation of Data

There is a general understanding that university plays a crucial role in regional development under the current age of knowledge economy. At the same time, we have observed a fair number of counter‐evidentiary studies, demonstrating several regions that do not thrive despite strong research universities or other patterns of development in the absence of research universities. However, they are based on case studies of individual universities or regions, and the findings currently cannot be generalized. Another set of studies that have challenged the effect of universities at the nationwide scale and demonstrated its disproportionately small impact of universities, but their scope is limited to spin‐offs, patents, and license activities. In this article, we propose to investigate this subject more systematically by triangulating three methods: 1) national‐scale regression models with Business Dynamics Statistics and National Establishment Time Series data, 2) a regional survey of IT and life science firms in four so‐called “second tier regions,” and 3) a microeconomic firm‐level analysis based on interviews with founders of technology intensive firms. Furthermore, we test the roles of university beyond those explicit, direct measures of spin‐offs and patents by analyzing the firm formation rate and firm growth rate at the regional level, as well as the sources of growth at the company level. All results point in the same direction: The research function of the university has been overstated, and the teaching function of the university has been underappreciated. These findings provide profound implications for the policy of regional development.     

Firm Networks and Korean Subsidiaries in the United States

ABSTRACT This article examines the role of intra‐, inter‐, and extra‐firm networks in influencing the location and investment of Korean firms and their subsidiaries in the U.S. Based on a survey of Korean subsidiaries in the U.S. in 2004, this article finds that inter‐firm relations with customers and suppliers, as well as intra‐firm relations in the form of parent firms’ knowledge of the U.S. play an important role in locational decision. Korean subsidiaries’ relationships with U.S. places are strongly influenced by home‐based practices that favor hierarchical intra‐firm organization and embedded sociopolitical extra‐firm relationships that emphasize blood, school, and regional ties. Location in U.S. industrial clusters does not increase Korean subsidiaries’ level of autonomy from parent firm's control that could help facilitate the sourcing of local knowledge and resources. Only improved intra‐firm network positionality positively contributes to increased subsidiary autonomy. Overall, the findings indicate that while inter‐firm relations may be important in locational selection among Korean firms, network norms are largely maintained through intra‐firm and, to a lesser extent, extra‐firm relations.     

Regional Innovation Systems: Implications for Nonmetropolitan Areas and Workers in the South

ABSTRACT A public policy response to global competition is the creation of a geographic concentration of innovative activity (regional innovation systems [RIS]) that will enhance metropolitan economic development through knowledge spillovers, product development, and new firm spin‐offs. This article identifies three types of RIS in the thirteen southern states based on a cluster analysis of twenty indicators of innovative and entrepreneurial activity. Next, regression analysis is used to determine if the 1990–2000 growth rates of nonmetro county population, employment, and earnings were related to proximity to an RIS after controlling for other county characteristics associated with local economic development. The research findings indicate that nonmetro counties near an RIS experienced more rapid population and employment growth; however, changes in nonmetro growth rates varied by type of regional innovation system. In addition, proximity to an RIS had a stronger impact on nonmetro population change than on nonmetro job growth.     

Extra‐Firm Networks and Firm Performance: A Study of South Korean Solar PV Firms and Industry Specific Government Actors

Extra‐firm actors have been acknowledged as vital to the success of green energy industries. This article deploys the firm network perspective to deliver a first of its kind analysis of specific extra‐firm actor impacts on firm performance in Korea's solar photovoltaic industry. Results are based on quantitative analyses of data from 60 firm respondents and augmented by interviews with eight government officials. Three research questions capture and compare firm and government actor perceptions pertaining to extra‐firm actor influences at the national, regional, and extra‐local scales, inclusive of place–place competition and cooperation. Results indicate that firms differ in perceptions related to the impact of 18 national level government institutes, R&D centers, associations, and academic societies on their success, and that perceptions vary by level of technology concerning a plethora of other related extra‐firm actor and support infrastructure impacts. A comparative perspective is presented based on government informant interviews.     

Do Entrepreneurs Enhance Economic Growth in Lagging Regions?

Because support for entrepreneurship is often a core part of economic development strategies, we investigate whether it is important for growth in lagging, rural U.S. regions by focusing on Appalachia. While entrepreneurship has the advantage of being endogenous and “home grown,” previous research suggests that remote rural regions may lack the agglomeration economies to benefit greatly from entrepreneurship. Using county‐level data, we explore the relationship between entrepreneurship and economic growth, employing self‐employment and small business data as proxies for entrepreneurship. We look at the results for the Appalachian Regional Commission (ARC) region, using its immediate Appalachian neighbors outside the ARC region as a control group. Moreover, we also account for self‐sorting by proprietors to locate in expanding regions. Despite strong barriers to growth in Appalachia, our empirical results suggest that self‐employment is positively associated with employment and income growth, and that efforts to promote entrepreneurial capacity may be among the few economic development strategies with positive payoffs in remote regions.     

The elusive quest for balanced regional growth from Barlow to Brexit: Lessons from partitioning regional employment growth in Great Britain

The British Government’s economic strategy for post‐Brexit Britain of achieving balanced regional growth by “driving growth across the whole country” echoes the objectives set by the Barlow Report of 1940. The regional policies that followed the Barlow Report were heavily influenced by papers written for the Commission by G D A (later Sir Donald) MacDougall. The first of these papers was included as an appendix to the report itself and introduced the shift‐share methodology to the analysis of regional employment growth, and subsequently shown to be flawed. The second paper considered the urban hierarchy and growth but was never fully developed. Consequently post‐war regional policy focussed on the contribution of industrial structure to employment growth without fully taking into account the urban hierarchy or regional locations of that employment. This article replaces the flawed shift‐share methodology with multifactor partitioning (MFP) and applies it to regional employment growth for the period 1971‐2012, a span of special interest because it largely coincides with British membership of the European Union (EU). The deficiencies in the second paper are addressed by introducing allometry to measure the employment growth of each region relative to that of Great Britain and then regression analysis to relate the allometries to distance from London. The results of the two sets of analyses highlight the need for a multiple‐factor, comprehensive, and integrated approach to regional policy and provide a benchmark against which to gauge the success of Britain's post‐Brexit policy of driving future growth across the whole country.     

Urban Development and Knowledge‐Intensive Business Services: Too Many Unanswered Questions?

ABSTRACT It is often assumed that future urban employment will be increasingly dependent on the knowledge‐intensive business services (KIBS). This underpins much of the current thinking about the development of the English “core cites.” Their example is employed to examine the more general validity of such assumptions, in terms of five critical questions to which research offers only partial and indefinite answers. For any city, how far are these activities really “knowledge intensive”? What markets do they serve? Is their future growth certain? And even when this is the case, how can they make a long‐term contribution to local urban economic success? Finally, how far do urban economic institutions and policies need to be adapted to foster knowledge‐based activities such as KIBS? It seems that, despite the growth of measured KIBS employment, most of the core cities possess few truly knowledge‐intensive KIBS, capable of serving national and international business markets, competitively adapting to future change, and adding to the competitiveness of the wider urban economy. Nationally such activities remain focused into the London region where, if anything, they have increased their concentration is recent years.     

Estimating Employment‐Related Migration from Overlapping Migration and Commuting Networks

A U.S. county workplace‐to‐workplace or latent migration data set is generated from overlapping migration and commuting networks. The latent migration network is the estimated number of movers between places of work, which is then compared with the actual number of migrants between places of residence. This allows both employment‐related and amenity‐related migration and pull/push factors as causes of migration flows to be identified and contrasted. Certain counties and cities that are not important migration destinations (e.g., with <200,000 net in‐migrants between 1995 and 2000) according to official data are in fact important targets when additional in‐migrants who commute into surrounding counties also are considered. An econometric analysis is then used to examine whether different regressors have different effects on the residence‐ versus employment‐based migration patterns. This is a first assessment of whether or not the proposed approach has merit. Results are consistent with prior expectations regarding the factors that would motivate latent versus actual migration.     

Does Creative Destruction Work for Chinese Regions?

Creative destruction is a key driving force behind industrial development. The continuing process of creative destruction provides an impetus to regional industrial renewal. Our analytical framework emphasizes the ways in which firm exit creates a stimulus for firm entry is complementary to the process of technological change and industrial renewal articulated by Schumpeter who pays attention to how new entrants bring in radical innovation and new products, making incumbents' products and technologies obsolete and forcing them to exit or catch up. Using firm‐level data of China's industries during 1998–2008, this paper seeks to argue that the relationship between firm exit and entry has been constantly shaped by an assemblage of various factors, including not only firm characteristics, but also industrial linkages, and most importantly, national and regional institutional contexts, particularly in the context of China where a triple process of decentralization, globalization, and privatization has resulted in enormous spatial and temporal variations in the economic and institutional landscape.     

Drivers of Regional Efficiency Differentials in Italy: Technical Inefficiency or Allocative Distortions?

This paper estimates regional economic efficiency differentials at the firm level for the Italian manufacturing sector in the period 1998–2003. We implement an input distance‐function approach providing measures of both technical inefficiency and allocative distortions in the choice of input mixes. Our results confirm the substantial technical efficiency gap suffered by firms located in Southern regions, thus providing empirical support for the “structural and technological gap” interpretation of Italian dualism. On the other hand, the allocative distortions in the use of inputs show less‐remarkable regional differences. In terms of policy, our results suggest the need for a reallocation of public resources for development policies from business incentives to public investment.     

Regional Indexes of Leading Indicators: An Evaluation Of Forecasting Performance

ABSTRACT Indexes of leading indicators are used to forecast short-run changes in economic activity in many states and metropolitan areas. This article examines the forecasting performance of a sample of such regional indexes over several business cycles. Although these indexes vary across regions, the results show that they do provide forecasts of recessions and recoveries and also exhibit some potential for forecasting quantitative changes in regional employment.