The Role of Industry, Occupation, and Location-Specific Knowledge in the Survival of New Firms

C. Jara Figueroa, Bogang Jun, Edward Glaeser and Cesar Hidalgo

No 24868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How do regions acquire the knowledge they need to diversify their economic activities? How does the migration of workers among firms and industries contribute to the diffusion of that knowledge? Here we measure the industry, occupation, and location specific knowledge carried by workers from one establishment to the next using a dataset summarizing the individual work history for an entire country. We study pioneer firms–firms operating in an industry that was not present in a region–because the success of pioneers is the basic unit of regional economic diversification. We find that the growth and survival of pioneers increase significantly when their first hires are workers with experience in a related industry, and with work experience in the same location, but not with past experience in a related occupation. We compare these results with new firms that are not pioneers and find that industry specific knowledge is significantly more important for pioneer than non-pioneer firms. To address endogeneity we use Bartik instruments, which leverage national fluctuations in the demand for an activity as shocks for local labor supply. The instrumental variable estimates support the finding that industry related knowledge is a predictor of the survival and growth of pioneer firms. These findings expand our understanding of the micro-mechanisms underlying regional economic diversification events.

JEL-codes: D22 J24 N1 N16 O1 O14 O15 O5 O54 R12 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-his, nep-lma, nep-tid and nep-ure
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Working Paper: The role of industry, occupation, and location specific knowledge in the survival of new firms (2018)
Working Paper: The role of industry, occupation, and location specific knowledge in the survival of new firms (2018)
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