Entrepreneurship and Openness

Entrepreneurship and Openness

Theory and Evidence

Industrial Dynamics, Entrepreneurship and Innovation series

Edited by David B. Audretsch, Robert E. Litan and Robert Strom

A growing body of evidence has documented the critical role that entrepreneurs play in fostering economic growth. But entrepreneurs can only be expected to take risks in ‘open settings’, where individuals and firms are free to contract with one another. In this important book, leading economists explain and document the role of open markets, within and across national boundaries, in facilitating entrepreneurship, innovation and economic growth. The main message of this book is especially timely given growing concerns in developed countries in particular about off-shoring and openness to trade.

Chapter 5: Entrepreneurship and the City

Edward L. Glaeser

Subjects: business and management, entrepreneurship, economics and finance, economics of innovation, innovation and technology, economics of innovation


Edward L. Glaeser INTRODUCTION In 1961, Benjamin Chinitz described Pittsburgh and New York City as ‘contrasts in agglomeration’. While New York City appeared to be full of independent entrepreneurs, Pittsburgh was dominated by a small number of large, vertically integrated firms. Thirty years later, Annalee Saxenian (1994) described a similar contrast between the highly entrepreneurial computer industry in Silicon Valley and its much more corporate counterpart in Boston’s Route 128. Today, measures of entrepreneurship, like the self-employment rate, continue to show sizable differences across metropolitan areas. One in every ten workers in the West Palm Beach metropolitan area is self-employed; the comparable number for Dayton, Ohio, is less than one in thirty. Why are some cities so much more entrepreneurial than others? This chapter attempts to analyze some basic facts about entrepreneurship across urban areas. In Section II, I discuss two widely available measures of entrepreneurship: the self-employment rate and average firm size. Both of these measures are quite imperfect attempts to capture the number of entrepreneurs relative to the overall amount of employment in an industry. Though it has a long history of being used to study entrepreneurship, the self-employment rate is particularly oriented towards the smallest entrepreneurs and makes little distinction between Michael Bloomberg and a hot dog vendor outside of city hall (Evans and Jovanovic, 1989; Blanchflower and Oswald, 1998). Conversely, the number of workers per firm is more likely to capture the presence of larger scale entrepreneurs. One problem with either measure is that when entrepreneurs...

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