Creative destruction and regional productivity growth: evidence from the Dutch manufacturing and services industries

Do firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, as measured by...

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Bibliographic Details
Published in:Small business economics 2011-05, Vol.36 (4), p.401-418
Main Authors: Bosma, Niels, Stam, Erik, Schutjens, Veronique
Format: Article
Language:English
Subjects:
Business and Management
Business innovation
Business structures
Comparative analysis
Competition
Competitiveness
Economic activity
Economic growth
Employment
Entrepreneurs
Entrepreneurship
Incumbency
Incumbents
Industrial Organization
Management
Manufacturing
Market entry
Market exit
Microeconomics
Netherlands
Population density
Productivity
Productivity growth
Productivity measurement
Regional analysis
Regions
Service industry
Studies
Total factor productivity
Turbulence
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Summary:Do firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, as measured by total factor productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities.
ISSN:0921-898X
1573-0913
DOI:10.1007/s11187-009-9257-8