ENTREPRENEURIAL AND REGIONAL GROWTH ACTIVITY IN FINLAND

Abstract

Audretsch & Feldman (2004) argue that an agglomeration is a collection of localized firms with a common focus. As firms thrive, resources are attracted to the region. They state that, if entrepreneurship serves as a mechanism for knowledge spillovers, measures of entrepreneurial activity should be linked positively to regional growth performance. In Schumpeterian economics the engine of economic development is entrepreneurial innovation. Creative destruction makes way for new innovations and growth. In this study, we simultaneously examine the regional entrepreneurial activity and regional growth activity in Finland. A further aim of the study was to find out if entrepreneurial activity and growth activity also play a deagglomerating role. We find, first, that the indicators used are very well suited to measure the dynamic environment, especially in manufacturing, since the regions with the most dynamic environment were areas with high small-business activity. Furthermore, the study indicates that growth activity should be taken into account when examining regional development by means of the concept of the dynamic environment. Secondly, we find that entrepreneurial activity and growth activity decreases regional specialization, i.e., the regions with the highest regional specialization are characterized by the lowest levels of entrepreneurial activity and growth activity. Our study confirms with Finnish data the findings of Dumais et al. (2002) that new plant births play a deagglomerating role. The results of the study indicate also that growth activity tends to act to reduce regional specialization. As a whole, the results suggest that the regional specialization is the result of a dynamic process in which the combination of plant births and growth act together.Dynamic environment, entrepreneurial activity, growth activity, regional specialization