Entrepreneurship, technological knowledge and industrial heterogeneity: Evidence from Italian NUTS3 regions

This chapter investigates sectoral differences in the relationship between new firm formation and the properties of local knowledge bases, i.e. technological coherence, cognitive distance and variety. By combining the literature on the knowledge spillovers of entrepreneurship with the recombinant knowledge approach, we posit that the availability of local knowledge together with its composition specificities explain local entrepreneurial processes. The analysis focuses on Italian NUTS 3 regions, observed over the period 1995-2009. Results confirm that local knowledge spillovers are drivers of firm creation. However, the evidence about the knowledge indicators shows that coherence is negatively associated to new firm formation, while variety yields positive effects. This suggests that the creation of new firms is associated with exploration-oriented local search strategies, and that established technological trajectories are beneficial to incumbents rather than to prospective new entrepreneurs.