Article ID Journal Published Year Pages File Type
10437803 Journal of Economic Behavior & Organization 2005 27 Pages PDF
Abstract
Studies on agglomeration show that economic characteristics explain only a portion of variance in entrepreneurship rates across regions. To complement these studies, I argue that entrepreneurship tends to concentrate geographically, in part, because of the social environment. I suggest that, when making decisions, individuals follow social cues and are influenced by what others have chosen, especially when facing ambiguous situations. Such influence may be described as a non-pecuniary network externality. Using a non-linear path-dependent stochastic process, I build a model of entrepreneurial dynamics showing why communities with initially similar economic characteristics may end up with different levels of entrepreneurial activity.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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