Knowledge Intensive Entrepreneurship
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Knowledge Intensive Entrepreneurship

The Birth, Growth and Demise of Entrepreneurial Firms

Frédéric Delmar and Karl Wennberg

How and why are firms created, expanded and terminated by entrepreneurs in the knowledge intensive economy? The authors show these entrepreneurship processes are firmly embedded in a given social and economic context, that shapes the process by which some individuals discover entrepreneurial opportunities, creating new firms that sometimes grow to remarkable size, but more often stay mundane or eventually exit.
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Chapter 3: Birth of New Firms: The Geography Connection with Karin Hellerstedt

Frédéric Delmar and Karl Wennberg


In this chapter we do two things. We start by introducing a discussion on initial conditions that are important both at entry and at exit. As has already been mentioned, on the aggregate or regional level, entry and exit are often intimately related (Geroski, 2001). But the entry process of new firms also affects their evolution and eventual exit. Micro oriented entrepreneurship research has indicated how resources and environmental conditions present at the time of founding can influence new firms in long-lasting ways, even if more resources are accumulated and environmental conditions change (Delmar, Hellerstedt, & Wennberg, 2006). This suggests that the entrepreneurial process by which individuals engage in the start, the growth, and the exit of a firm is strongly path-dependent. Fundamental to this line of research is the assumption that entrepreneurial skills, resources, and networks will influence the firm’s development even though the environment and the firm will continue to change. As we will see, these resources tend to be strongly linked to the region. Of particular interest is the role of geography in the creation and evolution of new firms. Second, based on the importance of initial conditions at the regional level, we present empirical analysis on how characteristics of the economic milieu of regions influence firm births. The data material provides information on all knowledge intensive start-ups across the 286 Swedish municipalities between 1994 and 2002. We use a slightly narrower time frame than in the preceding chapters, since some of the important predictor variables were available...

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