Nicholas Kacher, Tasos Kitsos , Jacob Moore, Raquel Ortega-Argilés (p), Luke Petach, Stephan Weiler

Bernadette Power

This paper analyzes how entrepreneurship impacts regional economic outcomes in terms of job creation, income distribution, and structural shocks, and by extension, whether the promotion of entrepreneurship serves as a viable regional development strategy across the broad goals of growth, inclusion, and resilience. We first explore these effects across the American geographic spectrum, from metropolitan to micropolitan to rural areas, with particularly emphasis on the latter where poverty rates are on average highest and have declined the least in the recovery for the Great Recession. We then extend these analyses to the UK regions at the NUTS3 level to compare outcomes in the American versus UK contexts.

Recent empirical work based on regional endogenous growth models suggests that entrepreneurship has an important role in economic growth beyond the direct employment gains generated by successful entrepreneurial ventures. Business dynamism has been shown to contribute positively to future regional employment growth through information spillovers, with entrepreneurs able to learn from the successes and failures of predecessors. This work pioneered both the concept and empirical evaluation of the concept of geographical informational asymmetries (GIA), in a unique spatial application of Akerlof’s seminal work, leveraging frontier instrumental variable techniques.

This recent work on information spillovers from entrepreneurial activity has primarily focused on employment growth as the dependent variable of interest. While employment growth is one valuable metric of economic performance, it remains unclear how entrepreneurship-led employment growth might affect income distribution as well as how resilient such microenterprise-led growth is to structural shocks. We thus extend the GIA growth model to test whether direct job creation and indirect information spillover effects from entrepreneurship affects income distribution and poverty rates across US counties and UK regions.

The well-known survival difficulties of startups alongside the lingering finance implications of the 2008 recession indicate that assessing the resilience of entrepreneurial-led growth and distribution effects is a critical part of properly evaluating entrepreneurship as a viable regional economic development strategy. Recent work has demonstrated that small business lending is in fact a critical component of employer establishment births in the US. Therefore, the final piece of this inquiry will explore how the structural shock of the Great Recession impacted the links between entrepreneurship, growth, and income distribution.

Justin Doran , Bernaette Power (p)

Raquel Ortega-Argilés

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