This paper aims to ascertain whether related and unrelated industry variety affects
the creation of innovative as opposed to other start-ups in Italian local labor
market areas. The analysis combines elements from the knowledge spillover
theory of entrepreneurship, the recombinant growth approach, and evolutionary
economic geography.
Using data on Italian innovative start-ups created between 2012 and 2015,
and on firms newly-registered with the Italian Chambers of Commerce, and
applying appropriate count data models, our estimates show that innovative
start-ups are more frequently created in areas where unrelated variety is
higher.
This is because innovative start-ups find more opportunities to recombine
different pieces of knowledge, or maximize their portfolio of demand opportunities,
in such a setting, whereas a higher related variety stimulates the creation
of other types of new start-up, for which it is easier to combine similar, complementary
knowledge sources. We also find that half of the effect of related
and unrelated variety comes from the localization of (innovative) start-ups in
large urban areas
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