Entrepreneurial innovativeness: When too little or too much agglomeration hurts

Emilio Pindado, Mercedes Sánchez and Marian García Martínez

Research Policy, 2023, vol. 52, issue 1

Abstract: This study sheds light on the relationship between agglomeration, entrepreneurs' internal resources and capabilities, and new ventures' innovativeness using a multilevel framework. We argue that the urban agglomeration of economic agents within a country has an inverted U-shaped relationship with new ventures' innovativeness, suggesting that both insufficient and excessive agglomeration might be detrimental to entrepreneurial innovativeness. Additionally, we perform interactions between individual level factors and urban agglomeration to examine the differential effects of entrepreneurs' internal resources and capabilities. Results confirm our hypothesising that the geographical concentration of economic agents within a country exerts an inverted U-shaped influence on new ventures' innovativeness. Furthermore, we find that entrepreneurs with higher levels of education or prior entrepreneurial experience are better equipped to benefit from agglomeration and to mitigate its negative effects; in contrast, at low levels of agglomeration, entrepreneurs with lower resources exhibit increasing marginal returns. Entrepreneurs in contact with other entrepreneurs are better positioned to deal with agglomeration externalities although their benefits and drawbacks are intensified. Our research contributes to the understanding of agglomeration externalities and entrepreneurial innovativeness, its non-linear dynamics and differential effects.

Keywords: Entrepreneurship; Innovation; Urban agglomeration; Proximity paradox; Firm heterogeneity; Multi-level analysis (search for similar items in EconPapers)
JEL-codes: L1 L26 M13 O3 R12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:52:y:2023:i:1:s0048733322001469

DOI: 10.1016/j.respol.2022.104625

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